IT Group Holdings Inc., symbol ITGL, acquired IT Telecommunications Plc (“IT”) based in London, England, in May 2006 as it’s wholly owned operating entity – a telecommunications carrier/operator supplying mostly wholesale access to subscriber lines and airtime to Resellers of telecom services for business and residential subscribers. IT was founded in 2000 and started trading in July 2004.
Investment Highlights
• Total Assets growth of 86% between year-end 2005 and Q3, 2006 .
• Completed installation of a large capacity public switch and network in the UK to increase margins and capacity, support VoIP services from other carriers, and allows IT to offer wholesale carrier-to-carrier terminations at competitive rates.
• IT’s core wholesale line rental and airtime products are making IT one of the
UK’s fastest growing telecommunications providers.
• IT offers Resellers and businesses wholesale rental line service to connect to local exchange at a substantial discount to other carriers.
• IT has established a UK-wide access and support infrastructure which has a high cost of entry for any competitor.
Value Proposition
IT believes it has established itself as one of the fastest growing telecommunications companies in the UK. IT has an indefinite contract with British Telecom (BT),that allows IT to sell line rental and airtime at highly competitive wholesale prices. Also, with the high–capacity switch in place IT will be interconnected with a host of other carriers to offer even more diversity on routes and services. This makes IT a lean carrier/operator producing good margins without the overhead or other burdens normally associated with established operators.
IT is currently trading at a price-to-sales ratio of .73 in an industry that trades at 2 to 4 times sales. IT’s (ttm) revenues are $22.02 million. The company expects revenue growth of 80-100% in 2007 with profitability. If the company trades in line with its peer group it should trade between $0.85-$1.70 today. At a current market price of $0.30, IT is considerably undervalued