Daisy: Redstone and the life of Riley

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Daisy Communications’ £17 million acquisition of Redstone’s fixed line, mobile distribution and service provision units primes it as the elite provider of unified communications to the SME market.

The deal, to be signed off August 28, is Lancashire-based Daisy’s third acquisition this month, and follows its £81 million reverse takeover of AIM-listed Freedom4 Group in July, absorbed under the Daisy brand.

At the time, Freedom4 Group also acquired voice and data reseller Vialtus for £42 million and raised a further £83 million by way of a share placing.

The new Daisy Group acquired IP reseller AT Communications and telecoms and IT supplier Eurotel for a combined £20 million at the start of August.

The merged business is to provide mobile, fixed line and broadband services to SMEs under the Daisy brand, except for Redstone’s mobile distribution division, which will continue to operate in its current form. It is yet to be made clear how Daisy will consolidate and streamline its acquisitions.

Cuts are inevitable as it integrates a sudden array of business interests and sites – AT Communications is in Harlow, Eurotel is in Halifax and Redstone employs around 50 staff in its Ipswich office running airtime distribution, and a similar number in London operating fixed line and service provision departments.

A consolidation strategy is to be discussed upon the closure of the sale, following the return of Daisy founder and chief executive Matthew Riley (pictured) from holiday.

Mobile dealers raised concern last week about the future of Dave McGinn, managing director of the Redstone airtime distribution business and a veteran since its days as Anglia Telecom and its sometime incarnation as Symphony Telecom.

Riley is expected to offer McGinn continuing charge of distribution as Daisy works immediately on finessing its expanded fixed line voice and broadband operations.

Riley is regarded as one of the brightest young entrepreneurial minds in the telecoms market. In 2007, he won Ernst & Young’s UK Young Entrepreneur of the Year Award and also the Bank of Scotland Entrepreneur Challenge, securing a £5 million interest free loan from Bank of Scotland and mentoring from retail magnate Sir Philip Green.

Riley started and sold three start-ups before founding Daisy in 2001 as a fixed line provider. It expanded into mobile in 2007, offering Vodafone and O2 contracts to SMEs via the reseller channel. 

However its strategy to be one of the largest UK telecoms providers only came to life with the Freedom4 merger last month, and is only cemented with the Redstone Telecom acquisition.

Indeed, Riley said of the Freedom4 action: “This is another step towards consolidating this fragmented sector and we will continue to pursue this strategy, building on our proposition of providing a truly converged product set to the SME and mid-market business customer.

“When the group floated in July we said the goal was to be at the centre of convergence and deliver a truly unified communications product. We understand how competitive this market is. It is all about service delivery and a consistent service approach and we can maintain high levels of service to be successful.”

Keith Froud, partner at Daisy’s legal firm Eversheds, explained the reverse takeover of Freedom4 enabled Daisy the kind of muscle to force consolidation and to gain the kind of economies of scale to sweat its assets and improve profitability.

“As soon as the merger took place, Daisy was bombarded with opportunities. In an industry that is ripe for consolidation, Daisy is in a good place. The merger has given Daisy a really good platform to kick off its acquisition strategy,” he said.

The acquisitions of Eurotel and AT added bulk to Daisy’s structure. Combined, the pair recorded revenue of £83 million and EBITDA of £8.8 million in their last filed financial results, for 2008/9.

But both were in administration at the time of purchase. Redstone’s share price has dropped from above 100p to just 8.8p in the past two years, but its brand and multi-fold telecoms interests have sparked interest in Daisy’s recent story.

Riley told Mobile News Daisy will rebrand and integrate Redstone’s fixed line business in due course, with the distribution side of the business to remain as is it is.

The market supposed last week Daisy’s primary interest was in Redstone Telecom’s fixed line and service provision units, and that the sale had been dependent upon it also taking the mobile distribution business. But Riley maintained the mobile element is a key part of Daisy’s vision.

Asked if its ambition is to be a SME market giant that can operate across fixed, mobile and ICT (in this grandly-titled new unified communications market of converged technology and channels), Riley responded: “This is exactly what we are talking about.”

Full article in Mobile News issue 446 (August 24, 2009).

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