When James Murray brought Alternative Networks (LON: AN.) to the AIM market in February 2005, the telecoms business he co-founded had already delivered ten years of profitable growth. That year the company turned over £46m, produced a pre-tax profit of £3.9m and Murray picked up Ernst & Young’s Entrepreneur of the Year award to boot. Six years on, sales and profits have more than doubled, Murray and his team have ably guided the business through recession and a long-standing strategy to blend organic growth with acquisitions is still proving fruitful. What sets this business apart from a typically fast-growing, acquisitive telco is its progressive dividend policy – indeed the dividend yield of 4% this year comes with a promise of a 10% rise over the next two years plus acquisition upside. No surprise then that the company’s shares have soared by 74p to around 251p since the beginning of March.

Alternative Networks has spent the last 17 years forming partnerships with big telecoms players and then typically working with small and medium sized businesses on cutting costs, improving efficiency and getting their communications systems working properly. It now works with more than 5,000 of those sorts of businesses. Murray, aged 40, insists that the company’s careful approach to growth, particularly in its formative years, has been central to its success. Bearing in mind that many of its peers were put to the knife when the telco bubble burst in the late 1990s, it is unsurprising that Murray remains so focused on the importance of product, service and profit – stumbling blocks that killed off very many others in the sector a decade ago.

James, tell me about what your plans were for Alternative Networks when your first set it up?

It was a long time ago now. We set up the business in 1994 and back then businesses in telecoms were either very large or very small. The idea of being able to set up a business in which you were effectively getting a recurring revenue from people’s phone calls was quite unique. That was the essence of setting up the business and then basically we grew it from there. Before that I sold telephone systems and before that I did very basic telephone engineering as well.

The telecoms industry has changed a great deal in the 17 years that Alternative Networks has been operating.…

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