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By | Kat Hall 30th June 2015 14:21

Confused Colt dumps the IT services market while revenues shrink

Company will burn millions shutting down biz

In a major about-turn, telecoms network provider Colt has today announced it will exit the IT services market as the firm searches for a fresh strategy to halt a worrying decline in revenue.

"We are taking decisive action to become a more focused and disciplined organisation," said Rakesh Bhasin, CEO, in an update to the London Stock Exchange, "which we believe will accelerate the performance of our core business."

Revenue from IT Services is expected to decline by around €20m (£14m) in each of 2015, 2016 and 2017 and to become immaterial by 2018, it said.

Colt’s new plan is expected incur a non-cash impairment charge of around €90m, as well as other exceptional restructuring cost of €25m relating to the core business, according to the company’s website.

Colt is currently under offer, with its majority shareholder Fidelity last week bidding 190 pence per share to buy the remaining stock and take the ailing firm private.

In 2014, the firm's core telecom division reported an 18 per cent plus decline in sales to €452m (£322m). IT Services also crashed.

Analyst firm Megabuyte noted the company will incur another raft of exceptional costs from "yet another strategy change".

It added: "It is staggering that Colt is seemingly unable to wrest any value for shareholders and, instead, will spend nearly €100m shutting down a €68m revenue business!"

It said Colt's decision to exit the IT services business "comes as no great surprise given that, as we have noted time and again, it consistently fails to grow what should be a thriving business".

It added: "Last year was the withdrawal from low/no margin Carrier Voice, whist the move into IT managed services was part of a major new strategy announced in May 2012. As we surmised at the time, the strategy required considerable investment, which Colt has now balked at making." ®

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