BUSINESS PROFILE
www.comms-dealer.com XLN poised for growth
Founded in 2002, XLN Telecom’s revenues in the last three years have grown from £27 million to over £54 million. According to celebrated entrepreneur and Group CEO, Christian Nellemann, the company’s success to date represents just the acorn of future growth.
Ernst & Young’s 2010 National Entrepreneur of the Year Award for Business Products and Services. The award win came less than a month after one of the UK’s leading mid-cap private equity groups ECI Partners took a majority holding in the company, which secured a significant commitment to support XLN’s ongoing business development and acquisition programme. As a result, XLN has the funds available to more than double the size of the business through acquisitions. Nellemann noted: “We now have a highly profitable and scalable business that will allow us to rapidly expand the range of services we deliver to the small business market. ECI will be a key part of XLN’s next chapter given the opportunities for consolidation within our sector.”
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There is a general belief that the further up the corporate rung you trade, the better the business. However, this is not an ethos Nellemann subscribes to. XLN Telecom specialises in the smaller contracts and with strong growth figures under its belt, 120,000 customers on the books and a
ctober proved to be a significant month for XLN Telecom with Nellemann scooping
second round of investment newly agreed, Nellemann explained to Comms Dealer why the adage of acorns and oaks is as true as ever. “I don’t think that going after the bigger customers will give you bigger margins,” he explained. “On the contrary, I think that when you’re dealing with larger customers you’re on a downward margin spiral.”
The problem for resellers who all chase the same 20-100 employee contracts, he believes, is that there’s always someone offering a cheaper service. “The first time you get a customer it’s because you’ve improved the terms from their previous supplier,” he said. “In two or three years time when the contract is up for renewal it goes out to tender. If you want to retain that business you have to beat the other offers out there, and the person who doesn’t have the business is prepared to take a cut to compete.”
Key drivers in XLN’s growth have been the management team’s development of a proprietary technology platform that allows new services to be smoothly integrated into the business, combined with the management team’s focused approach to
We want to move away from being a traditional telecoms company
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for businesses with just a few employees on their books. There’s even talk about the potential of providing sector specific ‘app stores’ for small businesses at some point in the future. “We want to carry everything that falls into the category of ‘it’s a little bit technical and a bit confusing’,” Nellemann added. “We want to move away from being a traditional telecoms company.”
Christian Nellemann
“We want to carry everything that falls into the category of being technical and confusing”
marketing, product development and customer service innovation. Leveraging these qualities and characteristics to the full, Nellemann is now planning a three pronged strategy for growth. “We’re making a serious push into data and IP,” he said. “That’s with broadband, hosting, websites, domain names, email and a more tailored proposition and product portfolio across fixed and mobile. We’re also going into payment processing, software as a service and hardware, computer screens, thin clients, cloud hosting and laptops.”
The ultimate goal is for XLN to be the supplier of choice
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The third angle of attack is acquisition, and in order fund this XLN has secured a second outside investment from private equity firm ECI Partners which has become a majority shareholder in the firm. Zeus Private Equity, which funded a 2008 management buy-out, made four and a half times its original investment of £6.63 million in just two years before deciding to hand over its share to ECI. At the same time, Nellemann’s long time business partner and co-founder of XLN, Anthony Karibian, has also left the company for a new project.
ECI brings with it a war chest of between £80-100 million for acquiring other companies or customer bases. “There’s nothing we’ve got in our sights at the moment,” commented Nelleman. “But there are companies out there that have the majority of their business with bigger customers and some smaller SMEs that they don’t know how to make money from. We could take those customers and release that cash, enabling the vendor to go after the customers they really want.”
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