Almost every UK-listed telecoms group has found its fortunes dictated to some extent by sector leader BT. Yet several recent AIM arrivals have found an intriguing route around this by targeting international markets.

Teleunit is a prime example. The group – which offers a range of services including fixed-line calls, phone cards and broadband connections to Italian customers – became AIM’s first Italian arrival in May 2004, securing C15 million (£10.2 million) from investors prior to its arrival.

This cash will be spent developing infrastructure. Although this can be a uniquely expensive process for firms in the telecoms sector, progress has been impressive thus far. Regional local loop unbundling is a prime example of this, as the process is expensive yet grants a stronger market presence. An agreement signed in February, granting the firm access to over half of the broadband market in Tuscany, therefore looks hugely promising.

But while Teleunit’s offering in this region is evolving rapidly, it should also be noted that its existing business has continued to perform well. 2004 saw the company grow profits from C3.8 million to C5.6 million on sales swollen more than C16 million at C60.8 million. The first half of 2005 was, admittedly, marked by a £100,000 reduction in profits (associated with some exceptional costs and low margin business). Nonetheless, management remains confident for the full year.

House broker Daniel Stewart shares in this optimism and reckons a profit of roughly C6.5 million is likely from just over C90 million of sales. Anticipated earnings of 2.8 cents place the shares on a tempting prospective p/e of 11, which drops to just 5.8 times forecast earnings for 2006.

Smart by name, smart by nature

Irish carrier Smart Telecom is executing a rapid expansion plan. Recent interims to 30 June were impressive at the top line, as sales leapt 160 per cent to C23.7 million. Much like Teleunit though, Smart offers a mix of traditional and new wave telecoms services to its clients, and heavy investment in local loop unbundling ensured losses surged 150 per cent to C11.2 million.

Smart is now seeking to raise a further £30 million to help it achieve its goals, in a placing fully underwritten by existing shareholder and Sunday Times rich list member Brendan Murtagh, the key person behind construction group Kingspan.

Bristling with positive intent, Smart looks set to continue its rapid growth in the Irish market. However if I had to back one of these two players at this time, profitable Teleunit would be my choice.

3C’s different proposition

Based in the UK but targeting the Central European markets, recent OFEX-to-AIM graduate Consolidated Communications Corporation (3C) offers a very different proposition.

Headed by Graham Pollard, a former senior board director at fully listed Colt Telecom, 3C currently claims a burgeoning presence in both the Russian and Hungarian telecoms markets.

Due to the infrastructure in these countries, the company’s technology has historically focused on larger corporate clients. This is because the telecoms provider needs to establish and maintain a physical connection to each of its customers, a process that has rendered targeting SMEs simply uneconomic.

However, 3C is increasingly utilising internet protocol technologies to underpin its wares, removing the need for a physical connection and affording the company the chance to target a wider market.

To Pollard, the reason for targeting Russia and Hungry, rather than more local territories, is a practical one. ‘One of the significant reasons is the higher margin we can make there,’ Pollard enthuses. ‘There are a number of carriers in Russia and the market’s competitive but it’s nowhere near as competitive as Western Europe.’

3C, Pollard adds, moved up from OFEX to AIM in order to raise its profile, attract institutional support and assist growth. AIM paper is far more appealing than OFEX paper when it comes to acquisitions and 3C has high hopes for a move into other Central European territories including Poland and Bulgaria.

Still loss-making (to the tune of £1.4 million in the six months to June) 3C is highly speculative. But, with a valuation of around £7 million, it does offer an interesting slant on the telecoms theme.