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19 – Bluecherry Telecom

On 8 April 2014 AdEPT Telecom acquired approximately 2,000 customers following the signature of an agreement to acquire the share capital of Bluecherry Telecom Limited (“Bluecherry”) for an initial consideration of £1.8m plus the value of the net assets at completion (estimated to amount to £0.25m and being represented by cash), payable in cash.  Further consideration of between £0.2m and £0.75m will be payable, also in cash, dependent upon performance of the contracts post-acquisition. Following the Bluebell Telecom acquisition in August 2013, this acquisition further demonstrates the ability and desire of AdEPT Telecom to continue its strategy of consolidation of the fixed line telecommunications sector.

AdEPT has c20,000 customers. The 1,000 largest customers equate to about half of the revenue and the 19,000 smaller customers the other half. Our strategy is to concentrate our organic sales efforts on attracting larger customers, particularly in the public sector. Rather than operate a telesales operation aimed at acquiring smaller business customers we instead use our cash generation to buy customer bases from other telesales operations in the industry. Our smaller in-fill acquisitions are therefore partly an alternative to sales and marketing spend.

The Bluecherry acquisition is another small, partly in-fill, acquisition. The total consideration will be funded out of AdEPT’s existing bank facilities. The business customers of Bluecherry complement the AdEPT portfolio as they are all UK-based fixed-line telecom business customers taking communications products including lines, calls and broadband services. Management of the Bluecherry contracts will be transferred to AdEPT’s office in Tunbridge Wells, Kent during April 2014. Based on recent management accounting information, annualised revenue and EBITDA of Bluecherry is approximately £1.2 million and £0.45 million respectively.