Magnet increases capex by €25m

7 Feb 2007

The Columbia Ventures-owned Magnet Networks has revealed that it will be increasing its capital expenditure by €25m but will be refining its approach to the Irish broadband market to focus on two key markets: the business market for broadband and voice and the residential market for fibre to the home.

The company’s new CEO Vern Kennedy (pictured) said that the €25m will build on the €45m already invested in kitting out 40 exchanges countrywide.

He said that the company is committed to offering services to businesses and consumers exclusively on a local loop unbundling (LLU) basis and would not be content with reselling broadband for the incumbent, which he likened to selling customers “stale old chips in a new bag”.

Kennedy joins Magnet after co-founding an LLU-based broadband company in the US called Broadview Networks, which grew to become one of the only surviving competitive telecoms companies in the US with over 250,000 subscribers, 600 employees and US$200m in annual revenue.

He said his plan was to focus on Magnet’s existing 40 enabled exchanges and add some new ones in a bid to capture 15pc stake in the Irish broadband market.

“What attracted me to Magnet was not only its commitment and focus but the fact that they are willing to take a long-term view. There is no doubt the Irish telecoms sector has been going through a very difficult period but that does not mean the industry can’t bring exciting products to customers. The aim is to build Magnet up to make a good profit.

“We will do this through focusing on our original fibre-to-the-home strategy but also on quality business broadband products. We are going to take all our resources and focus them on those two areas,” Kennedy said.

He said Magnet aims to make a difference in the business market because of its intensive investment in ADSL 2+ and SDSL technologies, which he described as prerequisites to business applications and bandwidth-hungry applications like voice over IP.

As part of the plan the company aims to treble the size of its sales force and bring in skilled product managers who will develop Magnet’s business voice and broadband products. “A lot of this is focused on customer acquisition. In the near term we are aiming to grow our customer base by a factor of three in Dublin and certain regional cities.”

The fibre-to-the-home strategy will be led by Magnet Entertainment, which he says is in the process of being rolled out in 20 housing developments around the country that will enable the company to reach some 40,000 when completed.

One of Kennedy’s first moves is to beef up the Magnet management team. Donal Hanrahan, former head of business services, will take on a sales and marketing role. The company has also appointed a new chief financial officer Mark Kellet, who until recently was group finance director for Yahoo! Europe and prior to that had financial roles at Aer Lingus, Thorn and Sun Microsystems.

Asked whether Magnet could achieve its goals in a market dominated by an incumbent determined to fight tooth and nail for every customer, Kennedy said that in the US he faced off similar challenges from leading players like Verizon and SBC Communications. “They were every bit as formidable as I expect Eircom to be,” he said.

“LLU is not easy but it can be done,” he said, referring to the fact that the company can reach two thirds of the market in Dublin and will leverage the regional network of metropolitan area networks (MANs) to serve housing developments and small and medium-sized businesses in the regions.

“The MANs are beach heads and we will use these to provide services to leading towns and cities,” he said.

By John Kennedy