PSINet Acquires Internet Companies in Hong Kong, Germany, France,
United States
PR Newswire - July 07, 1998 08:40
HERNDON, Va., July 7 /PRNewswire/ -- PSINet Inc. (Nasdaq: PSIX) announced that it completed the purchase of four
Internet companies, in Hong Kong, Germany, France and the United States, for approximately $46.0 million in cash. These
four companies generate annual revenue of over $23.0 million and represent another major step in executing PSINet's strategy
to expand its presence in the top 20 telecommunications markets worldwide.
These acquisitions further strengthen PSINet's leadership position as the largest independent global facilities-based Internet
communications provider. "Having completed a $600 million financing earlier this year, our primary objective has been effective
use of these funds for key acquisitions and bandwidth purchases, which will help move our business toward profitability," said
William L. Schrader, PSINet chairman, chief executive officer, and president. "Our acquisition team stepped up activity
following the financing and continues to actively search for the best Internet partners worldwide using a disciplined approach."
"We are pleased to team with Internet pioneers at LinkAge in Hong Kong, INX in Germany, SCII-CalvaPro in France and
ioNET in Oklahoma," Schrader continued. "Combined with our acquisitions earlier this year of iSTAR Internet Inc. in Canada,
Internet Prolink S.A. in Switzerland, STI-CalvaCom in France and Interactive Telephony Limited (ITL) in the U.K., PSINet
has acquired over $50 million in annual revenues."
"These acquisitions accelerate our entry into key world markets, build revenue and customer traffic on our network, and
contribute to earnings before interest, taxes, depreciation and amortization (EBITDA)," said Edward D. Postal, PSINet senior
vice president and chief financial officer. "With these acquisitions, PSINet is on track to meet our target of 100% revenue
growth for 1998 through a mix of organic growth and acquisitions."
Acquisition highlights from these four Internet companies:
* Over $23 million in acquired annualized revenue.
* Over 3,500 new business customers.
* Over 20,000 new "small office home office" and dial up customers.
* Revenue mix: 70% Internet access and 30% value added services.
* EBITDA neutral for the last reported quarter.
* Strong Hong Kong presence -- world's 19th largest telecom market.
* Expanded German presence -- world's 3rd largest telecom market.
* Added traffic on PSINet's 10,000 mile U.S. fiber network.
PSINet and its mature subsidiaries have earned market share leadership, based on the number of commercial Internet
customers: U.S. (#2 position of approximately 4,000 U.S. ISPs), Canada (#1 of 400), U.K. (#3 of 300), Japan (#7 of 300),
Hong Kong (#1 of 120 licensed), Switzerland (#3 of 130), and Germany (#5 of 300).
One of the key factors contributing to this global success is PSINet's ability to quickly integrate newly acquired companies.
"Our focus is to meld acquired teams with existing staff to combine networks, products, accounting systems, customer care and
other operations with those of PSINet," said Pete Wills, PSINet executive vice president and chief operating officer. "In fact,
due to the successful implementation of this integration strategy, PSINet Canada/iSTAR is on track to become EBITDA
positive in just four quarters. These recent acquisitions are currently being integrated into PSINet to take mutual advantage of
economies-of-scale, global coverage, and the tremendous global marketing power that PSINet enjoys."
LinkAge Online Limited -- Hong Kong
LinkAge, founded in 1994 by chief executive officer Chin Man, is recognized as one of Hong Kong's first commercial Internet
service providers and a leading supplier of total Internet solutions to businesses, professionals, government agencies and other
ISP's. LinkAge is the only Hong Kong ISP to operate a transpacific DS-3 ATM Internet backbone between Hong Kong and
the United States. Hong Kong is the 5th largest telecommunications market in Asia, and Linkage is the largest provider of
corporate dedicated Internet connections with approximately 35% market share. It also provides integrated business Internet
solutions, including Web hosting, managed co- location, intranet and extranet to companies throughout Southeast Asia.
LinkAge earned ISO 9002 certification, an international quality management system standard. Chin Man will continue to lead
LinkAge Online as a PSINet subsidiary.
Interactive Networx GmbH -- Germany
Interactive Networx (INX), headquartered in Germany's capital of Berlin, is the largest ISP in the city and nationally
recognized as a quality ISP. INX has five points of presence: Berlin, Hamburg, Frankfurt, Cologne and Hannover. It provides
complete business Internet solutions, integrating corporate networks with Internet access, web hosting, integration services and
access for individuals. Now combined with PSINet Germany GmbH, PSINet is one of the largest Internet providers in
Germany, which is the fastest growing Internet market in Europe. Germany is also the largest telecommunications market in
Europe, and the third largest in the world. This acquisition fits PSINet's German strategy of offering turnkey solutions for the
corporate market over PSINet's local calling network with 100% coverage in Germany. Interactive Networx serves major
clients including the Bank of Berlin, the Berlin Fair, major publishers like Gruner & Jahr and FAZ, major TV stations like ARD
and SAT1 as well as Daimler-Chrysler and Siemens. The company will be integrated with PSINet Germany, with Managing
Director Helmut Blank, and Co-Managing Directors Robert Rothe and Joern Lubkoll continuing to develop the INX brand
name for dial up services throughout Germany.
SCII-CalvaPro -- France
SCII-CalvaPro, headquartered in Paris, is a full-service business-to- business telecommunications company that provides
Internet applications and other communications services primarily to banks, shipping and forwarding agencies principally in the
sub-Saharan African market. SCII-CalvaPro services its customers by providing low cost data communications as an
alternative to the traditional high cost intercontinental data transmissions to and from Africa, using a network of agents,
distributors and full time staff. Although African Internet development lags behind other global markets, PSINet's commercial
customers elsewhere have been asking for a secure means of reaching many of their counterparts in Africa, and SCII-CalvaPro
is an excellent solution. SCII-CalvaPro was profitable for the year ended June 30, 1998. The company will be led by Francois
Benveniste, Managing Director of PSINet France, and will be integrated with PSINet, but operated as an independent
subsidiary serving Africa.
ioNET Internetworking Services -- Oklahoma
ioNET is a full service, value added provider of Internet and network systems integration services to businesses, universities
and residential customers in the south central region of the U.S. ioNET's service offerings include Internet connectivity, web
hosting and programming, and Internet consulting. In addition, ioNET has developed vertical market Internet services including
comprehensive banking, medical and telecommunications Internet solutions. By combining the Internet with systems integration,
ioNET has leveraged a variety of technologies in order to service the internetworking needs of its customers. The company will
continue to be led by founder Phyllis Johnson and CEO Leonard Conn and operated as an independent subsidiary.
Near Term Financial Impact
PSINet will announce second quarter earnings on July 21, 1998. These four acquisitions will have no appreciable revenue
effect until the third quarter; however, there will be acquired research and development expenses to be written off in the second
quarter. The company expects to complete the required valuation process prior to the July earnings release and anticipates the
acquired R&D write-off will be up to $20 million.
About PSINet Inc.
PSINet (Nasdaq: PSIX) is a global facilities-based Internet Protocol (IP) data communications carrier focused on the business
marketplace. As the first and largest independent commercial Internet service provider in the world, PSINet offers a broad set
of high-speed corporate LAN connectivity services supporting managed security and guaranteed Internet, intranet, electronic
commerce, Web hosting services, and services for other carriers and ISPs. PSINet operates an international state-of-the-art
frame relay-based, IP- optimized network connecting to ISDN, ATM, SMDS, and wireless/satellite systems, serving as of
March 31, 1998, over 33,000 corporations with over 400 points of presence extending to 10 countries.
Headquartered in Herndon, VA, PSINet has operations in the U.S., Canada, Hong Kong, Japan, Belgium, France, Germany,
Italy, the Netherlands, Switzerland, the U.K., and Africa. General PSINet company information can be obtained via telephone
at 703-904-4100; and specific service and sales information can be obtained by phone at 800-827-7482, by e-mail at
info@psi.com or by accessing the Web site at psi.net.
Certain of the statements made in this release are forward-looking statements that are subject to material risks and
uncertainties. Actual results could differ materially, as a result of a variety of factors, including competitive developments, risks
associated with the Company's growth, the development of the Internet market, regulatory risks and other risks which are
discussed in the Company's fillings with the Securities and Exchange Commission.
SOURCE PSINet Inc.
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