- The Washington Times - Monday, August 15, 2005

Transaction Network Services’ rapid expansion overseas has fueled a 20 percent increase in the young company’s stock price over the past six months.

The Reston telecommunications company last month acquired Process Logistics, a British rival in the market to transmit the data that allows banks and retailers to make electronic transactions.

The company provides customers with access to telecommunications networks and transmits their data.

Although the electronic transaction industry already is crowded with competitors such as MCI and AT&T;, TNS says it can beat the competition on price and service by focusing on a single niche: data transmission.

“It was designed from the ground up as a network that dealt purely with transactions and nothing else,” said Henry Graham, Transaction Network Services’ chief financial officer. “There are other people who provide the connectivity that we offer but they also provide voice and other things. It allows us to focus on what we do and what we do best, which is carrying data from point A to point B.”

Typical point-of-sale customers include merchants who accept credit, debit or ATM cards as payment. Other customers include fast-food restaurants, vending machine companies, health care providers, wireless telephone providers and financial services firms. Major U.S. customers include Time Warner, XO Communications and Merrill Lynch.

TNS was founded in 1990 and operates with 487 employees worldwide, 283 of them in the United States. The company operates throughout the United States and in 20 countries, where it is capitalizing on the worldwide trend toward deregulation of financial and telecommunications industries. Its international business has been expanding by about 35 percent a year.

So far, the biggest obstacle to growth has been “overcoming the status quo,” Mr. Graham said.

As an outsourcing company, TNS must convince customers that it can do a better job providing better service on their electronic transactions than doing it in-house.

“People have a tendency to leave things as they are and not try new offerings,” Mr. Graham said.

Nevertheless, the company is compiling impressive revenue gains and assessments from industry analysts.

“TNS was the first with the most in the fast-growing, under-penetrated and high-margin European market,” said Wayne Johnson, analyst for Raymond James, a St. Petersburg, Fla., financial services firm.

Franco Turrinelli, an analyst with Chicago firm William Blair & Co., said TNS has “unique expertise that combines telecommunications expertise and business understanding of the application of the transactions.”

The company’s greatest growth potential lies in further international expansion, he said.

TNS revenues rose this year although net income declined as a result of $1.7 million in expenses related to a stock buyback.

TNS reported revenue for its second quarter ended June 30 rose 7.2 percent to $65.4 million from $60.9 million a year earlier. Net income for the second quarter plummeted 83 percent to $251,000 (1 cent per diluted share) compared with $1.5 million (5 cents) a year earlier.

Over the past 12 months, Transaction Network Services’ stock price has risen about 30 percent from a low of $16.72 per share to a high of $24.19. TNS shares fell 7 cents yesterday to close at $24 on the New York Stock Exchange.

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