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UPDATE 2-Colt Group to slash carrier voice division, cut jobs
April 22, 2014 / 8:21 AM / 3 years ago

UPDATE 2-Colt Group to slash carrier voice division, cut jobs

* To withdraw 85 pct of carrier voice contracts

* Expects a charge of about 30 mln euros in second half of 2014

* Sees full-year core earnings 5-10 pct below consensus estimates

* Stock falls as much as 14 pct; biggest percentage loser on LSE (Adds CEO comments, details, updates share movement)

April 22 (Reuters) - Telecoms provider Colt Group SA said it would withdraw about 85 percent of its voice contracts over the next few months as part of a strategic review, wiping out about 175 million euros ($242 million) in revenue.

Colt’s shares fell as much as 14 percent on Tuesday, after the company also warned its 2014 profit would miss market estimates.

Luxembourg-domiciled Colt, which runs fibre-optic networks and data centres for large and mid-sized companies, said its plans would involve job cuts and charges of about 30 million euros in the second half of this year.

“There will be certain job cuts but we are going through the details of planning and will let the market know,” Chief Executive Rakesh Bhasin said on a conference call.

The company, whose clients include Fidelity, McAfee and Swiss International Airlines, expects about half the reduction in revenue to take place this year.

Colt’s voice business, which accounted for a little over a third of its 2013 revenue, has been under pressure over the past year due to pricing cuts by EU regulators.

The company warned that 2014 EBITDA (before restructuring charges) would be 5-10 percent below the consensus estimate of 325 million euros.

“Given that Colt’s record of cash generation is poor, we believe further execution will have to be shown before the potential of Colt’s plans is reflected in share price performance,” J.P. Morgan Cazenove analyst Carl Murdock-Smith said in a note.

“Today’s warning is unlikely to help in this building of confidence over time.”

VOICE WOES

Colt’s first-quarter revenue rose 2 percent to 399.8 million euros, but adjusted EBITDA fell about 8 percent to 74.1 million euros in the period due to lower margins, continued churn and pricing pressures in bandwidth products.

Colt said it expected the pressure on margins to continue in the current year.

On a constant currency basis, voice services revenue grew 0.8 percent. However, enterprise voice revenue fell 11.4 percent, a slightly smaller fall than the 12 percent decline a year earlier.

Colt’s total data centre revenue grew 0.5 percent, while IT services revenue grew 15 percent.

The company said it was seeing pockets of recovery across Europe, with UK becoming its biggest growth driver. However, it was experiencing a decline in revenue from legacy data products in Spain and Italy.

Shares in the company were down 11.68 percent at 127.8 pence at 1202 GMT. The stock was the top percentage loser on the London Stock Exchange. ($1 = 0.7244 Euros) (Reporting by Noor Zainab Hussain in Bangalore; Editing by Gopakumar Warrier and Saumyadeb Chakrabarty)

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