KDD buys Swiftcall in telecoms takeover

The giant telecommunications company KDD has bought out Swiftcall which offers cheap international calls to the residential market from Ireland. The price has not been disclosed, but the deal is understood to be worth about £5 million to Mr Tom McCabe, the company's sole shareholder.

It is understood that Swiftcall had a substantial amount of debt - not an uncommon phenomenon in the telecoms business. Industry sources put it at about £20 million. This debt was mainly monies due to other telecoms carriers and is being taken over by KDD.

However, sources say Mr McCabe will be retaining the US part of Swiftcall's operations. Based in Washington, it is said to have an annual turnover of £4 million-£5 million with good potential for growth.

It is unclear exactly how much Mr McCabe, who has left the company, got in terms of hard cash. Some estimates put it at around £1 million, adding that when the US business is factored in, this makes it worth £5 million-plus.

Swiftcall was formed in London in 1993 by Mr McCabe, an actor who has appeared in several TV series including The Bill. It currently employs around 180 staff at its call centre in Dublin and 20 people in London. It offers long distance calls at discounted rates, mainly off-peak, to the residential market. Callers have to dial a number in Belfast, quote a pin number and the calls are routed from there. To offer the service it buys minutes from other carriers. Industry sources said the company had been discounting heavily. One source said the carriers had been asked to "take a hit" on what they were owed, when KDD was trying to buy the business. Some agreed and some did not. "It seems that KDD was more interested in buying the business rather than the debts," said a source.

A statement yesterday confirmed that KDD had bought the business of Swiftcall and said the company's turnover is £26 million sterling. The company services 300,000 customers in the UK and Ireland, the statement said.

In February it was announced that KDD was paying £5 million for an option to buy 20 per cent of Swiftcall, prior to a planned flotation later this year. Mr McCabe said he would float 55 per cent of the company and claimed Swiftcall had been valued at $200 million-$350 million by Salomon Brothers in the US. However, it is understood that the company ran into some cash flow difficulties. Sources say Mr McCabe tried to find an alternative buyer, but KDD won out eventually.

Although Swiftcall advertises quite regularly, industry sources say the company never tackled its marketing properly. That said, they readily acknowledge that the company has built up a brand presence.

KDD is a giant telecoms company which carries Japan's international traffic. Formerly State owned, its shareholders now include the Mitsubishi Trust and Banking Corporation, Bank of Toyko, the Industrial Bank of Japan and the Nippon Life Insurance Company.

It is understood that KDD currently carries about 70 per cent of Swiftcall's traffic, but this will eventually increase to almost 100 per cent. KDD will use Swiftcall to launch more innovative products throughout Europe. In a statement KDD said it would be able to addresses "a broader spectrum of the market" by combining the companies. "KDD Europe also plans to make use of Swiftcall as a marketing vehicle for its European expansion, eg France and Germany," the statement added.