Big fish have something to fear as Atlantic Telecom snaps up the minnows

ATLANTIC Telecom is a relative tiddler in the communicationsocean. But it appears to be focusing well on the niches where it cando maximum damage to the big fish.

The possibly belated decision that it would targetsmall andmedium sized businesses, probably with up to about 10 or so phonelines, rather than residential or big business, narrows that focusfurther.

At present, BT still has about 80-85 per cent of SME accounts,and many other larger competitors, such as the cable companies,Kingston Communications, Thus, or Cable & Wireless, are focused moreon big business in focused areas.

This is partly because of the cost of providing direct telecomsand internet connections - to run cables past business premises orhomes can cost pounds 500,000 for every 1,000 reached, for example.

But Atlantic has the advantage of using high-speed radio linksinstead, which can be installed at a tenth of the cost, or GBP50,000 per 1,000 customers, making it much more viable to go for thesmaller customer in further-flung locations.

So far, the group only has licences to use radio links in the UK,but it may apply to do so in France, although Germany has sold allits licences for the time being.

Analysts calculate it needs only 5 or 6 per cent penetration inthe SME market of any specific geographical area in which itoperates to break even, and Atlantic is currently ahead of scheduleat about 4.7 per cent. Moreover, its average revenues per SMEcustomer were up 4.3 per cent last year, to GBP 86.95 per month.

Similarly, the technology Atlantic is applying to its new high-speed wireless internet and voice package, launched in April, shouldalso give it an advantage over the competitors, at least for awhile.

Its service, giving unlimited internet and voice call use tohomes for GBP 49 a month and to businesses from GBP 100 a month, canoperate at 2.4 megabytes a second.

In layman's language, that's greased lightning compared to the 56kilobytes at which the average modem operates on a normal BT lineand means internet pages can be downloaded virtually instantaneouslyinstead of the minute or so wait normally needed. It is also muchfaster than the ADSL alternatives coming through.

Atlantic's shares have underperformed the telecoms sector byabout 24 per cent so far in 2000 (although they have outperformed by158 per cent since January 1999).

With a fortress-strong balance sheet laden with cash, theexecutive chairman, Graham Duncan, is entitled to feel the gapshould close quickly.