ISP consolidation begins
BRISBANE - A sudden flurry of deals in Internet Service Provider (ISP) space is putting paid to the perception that its top players are all losing money.
Sydney's MicroPlex, at least one of the top six, is making enough to buy-up Pegasus Networks, one of Australia's longest-established ISPs.
Access One, another major player, is poised for the announcement of a new partner eager to bet a significant sum on its future (see sidebar).
"It's only coincidence that both deals are surfacing at almost exactly the moment a deregu-lated telecommunications environment is dawning in Australia," a spokesperson for Access One and Microplex said.
Microplex director Steve Engel declined to reveal a figure for the purchase, which he said was launched by discussions initiated by Pegasus last year.
Pegasus will carry on trading under its own name as a wholly-owned subsidiary. It had a few points of service competition with Microplex, and would continue to grow independently, Engel said.
Microplex's strengths lie in dial-up connections and corporate Web page hosting, while Pegasus' strongpoint is community-based networks.
Since the purchase, Microplex has sliced Pegasus' head count by 30 per cent to 14, with losses among technical, administrative and help desk personnel. It has also merged its existing Brisbane point-of-presence into Pegasus.
Microplex talked to a number of potential take-over candidates in addition to Pegasus, and is actively discussing further purchases to grow its customer base, according to Engel. Those contacts revealed that the Achilles heel of many struggling ISPs is their billing system, he said.
"Most of our competitors can't adequately bill their customers. Pegasus' system could bill accurately, which was a major step-up from most of the ones we've examined, but it had no flexibility in terms of adding new products."
Engel called Microplex's own billing system, "one of our crown jewels". It was developed in-house at a cost of $500,000 by Microplex, a 15-year-old company which was a Unix systems and communications consultancy, before morphing into an ISP.
Solution 6 seeks new shareholder
Building an ISP with a national network aimed at demanding corporate customers has been a draining exercise for Access One's parent company Solution 6.
The accounting software company spent millions covering Access One's losses, and has been seeking an investor to ease its burden.
Rumours abound about the identity of the shareholder. One of the strongest is that it is Telecom New Zealand (TCNZ), from whose corporate ranks Solution 6 recently plucked its current CEO, Chris Tyler.
TCNZ spent large amounts developing content for Xtra, its Internet service affiliate, but industry observers believe it needs to find a larger audience than New Zealand can supply.
Acquiring part of Access One would go some way to meeting that need, they speculate.
If true, this could mean a shift in focus for Access One from permanently connected corporate customers, towards the dial-up consumer market.
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