Domain name and Internet services supplier Melbourne IT has announced it has finalised its negotiations with both the International Corporation for Assigned Names and Numbers (ICANN) and its joint-venture partner, US telecommunications company NeuStar for operating the .biz domain registry.
Melbourne IT has finalised its agreement with joint venture partner NeuStar over the operation of the .biz domain registry. The Australian domain name supplier will spend $6 million out of its existing cash reserves to achieve a 10 per cent interest in the joint venture (named NeuLevel), and has the option to increase this investment to up to 30 per cent by the end of September this year.
Meanwhile, the ICANN board has met and commissioned its senior executives to iron out one or two matters relating to the appointment of NeuLevel as the sole registry for .biz. However, Melbourne IT chief executive officer Adrian Kloeden sees none of these as anything but peripheral to the overall outcome.
While Melbourne IT can afford its initial 10 per cent interest in NeuLevel on its current cash reserves, investing in the further 20 per cent option will require the raising of external capital.
"There are a number of sources of capital available," Kloeden told ARN. "If the revenue streams from our initial investment are strong enough in the first 12 months that revenue can pay for part of the capital."
It is likely Melbourne IT will have a hole in the company's balance sheet for approximately two years while the up-front investment is paid off.
"It is a significant investment, and the inevitable result is we could well have a reduction in EBIT," Kloeden said. "But we feel it is an investment well worth pursuing on behalf of Melbourne IT shareholders. Once shareholders are able to address the full merits of the case, they will realise the registry business is a major strategic investment for them."
The contract with ICANN is valid for six and a half years, with a possible extension of one year.