The options for telecoms investors in the UK are becoming thin on the ground after Manx Telecom and KCom — stalwarts of the mid-cap British network scene — and satellite communications group Inmarsat have been taken private in recent months.

However for those investors with their heads in the cloud, a clutch of smaller participants have emerged.

Companies providing cloud-based services are hiring software engineers and offering a potentially higher growth opportunity in communications technology. 

Cerillion 

The saga of the failed outsourcer Carillion caused some branding frustration for similarly named cloud-based billing and customer software Cerillion, according to Louis Hall, its chief executive.

The Aim-listed company, which named itself after the pure blue sky colour cerulean, develops software used by telecoms and energy businesses to bill and manage customers. It traces its roots to Logica’s glory days in the late 1990s, when the former British technology giant decided to focus on IT services and away from products. The small billing company was sold to its management team and has slowly emerged as a competitor to global groups such as Amdocs, Ericsson and NEC’s Netcracker in the market for cloud-based telecoms software.

Cerillion, which listed in 2016, remains a small player, with a market value just shy of £50m. But it has started to grow in stature. It counts Astrid, the Belgian emergency services network, NTT in Japan and Liberty Global’s Latin American sister company Lilac as customers.

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The deals are getting bigger. Norway’s Link Mobility and Denmark’s SE Group signed up for long-term £5m deals in June. Nokia, which is investing more in software and could be seen as a natural home for Cerillion in the future, is reselling its main products. 

Locking down contracts with larger customers will be key to the company taking more business from its bigger established rivals. 

Revenue in the six months to March fell to £7m from £8.4m due to the timing of the closure on some contracts. The pre-tax loss for the half was £786,226 compared with a £433,546 profit in the year before as a result. 

IMImobile

The text message is dead, long live the text message.

It seems a long time since mobile phone networks last boasted of buoyant revenue from what used to be called “data” services in the form of simple texts. SMS revenue was decimated by WhatsApp, Viber and Apple’s iMessage but a new form of enhanced text — known as “rich communications services”, or RCS — is on the horizon. 

RCS ranges from chatbots dealing with customer service complaints to app-like texts that can check in an airline passenger or deliver a compensation voucher if the plane is delayed.

US company Twilio and Croatia’s Infobip have emerged as large players in the industry and smaller UK company, IMImobile, has been expanding. The cloud communications company paid £43m for Boca Raton-based rival 3CInteractive last month as it doubled down on its push into North America after the takeover of Canada’s Impact Mobile a year earlier.

Investec said the 3C deal gave IMImobile “critical mass” in the US, which would now account for around a quarter of its profit. It funded the deal via a placing and the issue of new debt. The share price has doubled since the start of 2017, while the business’s market value has quadrupled since its 2014 listing.

IMImobile’s revenue grew 28 per cent to £142.7m in the year to March but its profit before tax was just £700,000, down from £2.7m a year earlier, due to higher costs and amortisation on acquired assets. For now however, the company’s strategy is for more growth. 

Toople

Toople listed for £8m in 2016 but was quickly dubbed “Topple” by traders as shares in the telecoms company tumbled. With a market value of only £3.3m it has yet to recover. 

Toople targets small business customers with cloud-based communications products and has invested heavily in marketing. Marketing spend rose 80 per cent in the first half. The group has also invested in a new call centre in Durban to handle customer inquiries.

It said in July that it had received more than 1,000 orders in May, with a value of £500,000 over a two-year period and that the business was in a “very good place”. 

Cash however remains a tight metric for the tiny business given its rapid rate of spending to attract new customers. It raised £2.2m in September 2018 to strengthen its balance sheet but the company had spent half of those funds by May this year on its marketing push. 

Toople insisted that the £1m of cash it had left in May was “sufficient” to continue to pursue its growth strategy despite the high burn rate.

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