Telecom Plus On Target for the Year

LONDON -- Telecom Plus (LSE: TEP.L  ) today issued its interim management statement, stating that the encouraging momentum it saw developing last quarter has continued. Despite the positive outlook, shares have opened down slightly today.

Perhaps best known for owning and operating the Utility Warehouse brand, Telecom Plus supplies a wide range of utility services (gas, electricity, fixed line and mobile telephony, and broadband Internet) to residential and business customers throughout the U.K.

Highlights of the statement include strong organic growth, positive cash flow generation and new mobile tariffs. But perhaps most important, the company is showing positive customer acquisition numbers, with overall residential customers increasing during the first quarter by 10,917 (a 50% improvement year over year), while business customers posted a more modest increase of 492 (still up year over year).

It's important that Telecom Plus proves it can continue to increase services provided and acquire new customers, especially as telecoms and utilities is a crowded space, with firms such as Centrica, SSE, and Telefonica all clawing for market share. (See which of these firms is featured in "Top Sectors for 2012", a special free report offered by The Motley Fool.)

Andrew Lindsay, Telecom Plus' chief executive, is confident, saying: "We have seen an extremely positive start to the year, with organic growth materially ahead of the levels we achieved in the corresponding period last year. Confidence within our distribution channel has never been higher, and we anticipate further strong organic growth."

But Telecom Plus' ability to offer discounted services and pass the savings on to customers is largely out of its control.

A number of energy suppliers have drawn attention recently to the upward cost pressures they are facing due to higher forward wholesale prices for gas over the coming winter (compared with last year) and rising non-commodity costs associated with investing in greener generation initiatives and upgrading the distribution infrastructure. The company expects that retail energy prices will increase this autumn, which could squeeze margins.

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Jill Ralph does not own any shares mentioned in this article. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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