Company News

Keytech Limited is a holdings company for a diversified group of telecommunications service providers and information technology businesses. Segmented information for fiscal year-end 2007 is as follows(in millions):

Keytech owns a 32% effective interest in Bermuda CableVision Limited, the main cable television service provider in Bermuda. During the fiscal year, the company increased its holding in WestTel Communications by $7.6 million, resulting in a controlling interest of 67%.

Keytech Limited announced net income of $9.1 million for fiscal 2007, versus $11.7 million in earnings for fiscal 2006. This decline of 22% in reported earnings was due to three main factors:

• The company’s controlling interest in WestTel, their fledgling Cayman-based wireless provider, generated losses in excess of Keytech’s equity stake in the amount of $1.3 million. In future periods, Keytech may offset these losses against WestTel earnings in excess of its equity stake.
• One-time costs of $1.5 million incurred during the launch of the M3 Wireless easyConnect service and from co-development plans for a new submarine cable to Bermuda.
• A government-imposed reduction in BTC’s local access charge on long distance (from $0.05 to $0.03 per minute) cost the company $1.8 million. Keytech is appealing this decision.

Income from continuing operations, net of the above factors, was $13.3 million for 2007, representing a
3.1% increase over the $12.9 million generated in fiscal 2006.

The predictable revenue stream and steady cash flow from Keytech’s “big brother” divisions (BTC,BYP) continue to fund the prospects of the company’s younger, less-profitable, and higher-growth siblings (M3, Logic, WestTel.) M3 Wireless appears to be poised for growth, with its Blackberry offerings continuing to penetrate the corporate market and its innovative easyConnect service gaining traction and starting to “pay dividends”. Logic Communications aims to improve on a pedestrian year,where margin deterioration in the competitive long distance market, along with disappointing results from consulting and hardware services, hurt its bottom line. WestTel, the Cayman-based fixed-wireless provider, stands as Keytech’s “wild card” division. After having posted substantial losses over the past few years due to infrastructure costs and new subscriber additions, this segment seems to have “turned the corner”, realizing positive EBITDA for the first time in the fourth quarter of fiscal 2007. Buoying the future prospects of Keytech shares is the possibility of a takeover bid, although a lackluster overture from Cable & Wireless has been refuted in the past. We rate this stock a “buy”, applying a 16.0x multiple to our projected fiscal 2008 operating earnings of $0.97, for a one-year target price of $16.00.

For disclosure purposes, we note that one director of LOM (Holdings) Limited is also a director of
Keytech Limited.