Our priority continues to be to maintain tight control over costs to minimise cash outflows, while continuously reviewing all of the Group’s operations to ensure that we attain an EBITDA positive position as early as possible.

I am delighted to report that we have today completed our DSL network in the Netherlands. Each of our 105 colocations is fully live, substantially ahead of schedule. From today, Atlantic has the widest alternative carrier deployment of DSL co-locations targeted at 225,000 SMEs in Amsterdam, Utrecht, Rotterdam and The Hague. As one of the few operators to have service level agreements in place with the incumbent, KPN, we will pledge to make 75% of connections within 10 days. This commitment will become a valuable tool in recruiting new customers to our broadband services.

We have seen similar success in Germany since the announcement of our first quarter operating statistics. As previously announced, our buildout of colocations was virtually complete in March. Since then, our focus has been on converting these colocations to becoming fully enabled for service. At 30 June, 312 were ready for service.

We have continued to see encouraging demand in the German market even during the normally difficult summer months, aided perhaps by reducing competition. Since 30 June, we have continued to sign new wholesale and retail agreements, which will contribute significant revenues over the coming year. Our retail partner channel continues to grow at a significant rate, and will be an important contributor to our sales going forward.

In the UK, we announced the sale of our indirect residential telephony business to Affinity Wireless Ltd for a cash consideration of £1.8 million. Atlantic will continue to carry the traffic from its former customer base, resulting in anticipated revenues of approximately £16.0m in the next 12 months, and the reduction in support costs means that the traffic will make a positive financial contribution to the Group.

Strategy

The Group’s strategy of focusing our investment primarily on the SME market is now generating strong growth in markets worth over £25bn. Atlantic continues to focus on providing value-added services, increasingly using a portfolio of broadband technologies, to a potential 1.3 million SMEs.

Results for the period ended 30 June 2001

Turnover for the period almost doubled to £20.1m, compared to £10.5m for the corresponding period the previous year (which included one month’s results from the acquisition of First Telecom Group, acquired during that quarter).

Our negative earnings before interest, tax, depreciation and amortisation (‘EBITDA’) showed continued improvement, at £12.5m, compared to £13.2m in the quarter ended 31 March 2001 and £12.7m in the quarter to 30 June 2000. The downwards trend is encouraging and demonstrates that our cost reduction programmes, announced in January and June, are having an effect with EBITDA losses now down almost 40% compared to the quarter ended 31 December 2000.

Our average revenues for the quarter have also remained at encouraging levels. In Germany, monthly revenues in the quarter ended 30 June 2001 averaged at approximately £316 per retail DSL line and £109 per wholesale DSL line compared with £334 per retail DSL line and £93 per wholesale line in the quarter ended 31 March 2001. These average revenues vary depending on the mix of speeds taken up by customers, and do not necessarily reflect an ongoing trend.

Average monthly revenue for directly connected FRA business customers in the quarter ended 30 June 2001 was £88.58 for business customers and £35.29 for residential customers. This compared with £85.99 for business customers and £36.05 for residential customers in the quarter ended 30 June 2000. Average revenue per indirect business customer in the UK for the quarter was £285.93 compared with £293.98 for the year ended 31 March 2001.

Balance sheet

At 30 June 2001 our cash balances, including restricted investments and cash deposits, amounted to £81.9m, compared to £134.6m at 31 March 2001. The useable cash balances, excluding the funds in escrow for the payment of interest on our bonds, amounted to £55.5m compared to £108.0m at 31 March 2001. We also continue to have access to a vendor finance facility from Marconi.

Our cash movements in any quarter are largely caused by our EBITDA losses, working capital movements and cash expended on fixed assets.

Our EBITDA losses for the quarter ended 30 June 2001 showed continued improvement, at £12.5m, compared to £13.2m in the quarter ended 31 March 2001 and £20.4m in the quarter ended 31 December 2000.

The working capital movement for the quarter includes approximately £14m for equipment obtained under extended supplier credit terms, which matured during the quarter. The magnitude of the movement in working capital was fully anticipated and in the ordinary course of business and will not be repeated in the current quarter to 30 September 2001.

The cash usage in the quarter also included £13.2m expended on fixed assets, as we near completion of our network build programme. Capital requirements going forwards will be materially reduced, reflecting the completion of our European networks, and UK reorganisation.

Our networks are now substantially finished and much of the capital spend going forward relates to customer take-up rather than network build. We have taken steps to significantly reduce our ongoing operational cash requirements and will continue to be vigilant in this area.

Operations Highlights during the quarter

UK Operations

In the quarter ended 30 June 2001 there was encouraging growth in the number of directly connected business lines which increased from 10,677 at 31 March 2001 to 11,374 at 30 June 2001. Churn for directly connected business customers of 12.95% for the quarter was down from 14.56% at 31 March 2001.

Directly connected residential lines continued to decline in the quarter from 41,202 at 31 March 2001 to 35,931 at 30 June 2001, representing a churn rate of 23.58% for the quarter. This decline in subscriber numbers is reflects our refocused strategy on targeting higher value business customers rather than residential customers.

Our strategy of focusing on business customers is also reflected in the movement in indirect line numbers in the quarter. Indirect business customer lines increased in the quarter by 2,955 lines to 80,530 at 30 June 2001. Residential customer lines decreased from 173,255 at 31 March 2001 to 157,201 at 30 June 2001.

SOURCE: COMPANY PRESS RELEASE