Gamma Communications

What does the company do?

Gamma Communications is a UK telecoms provider that sells a wide range of voice and data services, both fixed and mobile, to the business market. Unlike most telecoms stocks exposed to a secularly declining industry, Gamma has focused on exploiting growth niches. As a leading player in areas such as SIP trunk deployment and hosted PBX provision, the company is exposed to long-term secular telecom growth trends. Gamma has proved very adept at bringing new products to market, supported by its own Intellectual Property (“IP”) and growing them faster than its lumbering competitors, whilst providing outstanding customer service and defending its legacy base. Why do we like the investment? Gamma is an asset-light operator, owning core network assets but also leveraging third party infrastructure where required. It has built a strong position as a key provider to an indirect channel of business telecoms resellers, systems integrators, and other telecoms service providers. Financial performance has been strong, delivering growth in all key metrics since listing. Margins have progressively risen and cash flow performance has been strong. This performance has driven by an ongoing business transformation that no competitor has been able to replicate. Recently, the successes in the UK have been replicated in Europe with an acquisition in Germany. The German cloud telephony market is much less advanced and more than double the size of that in the UK. The deal is entirely in keeping with Gamma’s strategy. It also gives scale and geographic diversification. Companies selected for illustrative purposes only to demonstrate the investment management style described herein and not as an investment recommendation or indication of future performance.