Ihug seeks $40m for auction bid

By GEOFF SENESCALL

Internet service provider Ihug is understood to be raising $40 million to help finance a joint bid with Lucent Technologies for a slice of the airwaves at the Government's spectrum auction.

The dash to raise cash coincides with an attempt by Ihug to hold up the auction process by saying it will seek a High Court injunction because, it argues, the spectrum sale plays into the hands of existing mobile players.

Ihug wants Telecom and Vodafone prevented from buying all the second-generation spectrum on offer in the auction.

Unlike third-generation spectrum, which allows sophisticated multimedia uses but is still under development and might not be ready for three years, the 2G spectrum could be available for digital cellphone use immediately.

The Government, however, says it is not budging.

Attempts to contact Ihug last night were rebuffed. Asked to comment on the capital raisings, Ihug shareholder and director Tim Wood said he was in a meeting and did not call back.

It is understood an information memorandum seeking $40 million on behalf of Ihug has been circulated by the ANZ Bank.

With the spectrum auction set to begin on July 10, Ihug is working to a tight timetable. Expressions of interest were supposed to be in by Monday, with selected parties to do due diligence on Ihug between July 3 and July 7. Completion is to be on July 14.

The memorandum is believed to say Ihug has the resources to bid in the upcoming spectrum auction irrespective of a new equity injection. But the additional equity will provide flexibility for Ihug in its rollout of a new mobile communications venture.

The document also talks about Ihug having entered into a strategic partnership with Lucent to provide technology for rollout of a GSM cellular network.

Lucent recently won a multimillion-dollar Australasian contract with Telecom to roll out its second generation digital mobile network.

Ihug is said to be seeking between one and three shareholders. It expects to list on the sharemarket in about three years.

For the year to March 2000, Ihug made a loss of just under $3 million. But it is forecast to make a profit of $3.7 million this year.

This year Ihug attempted a backdoor listing with Force Corporation, which valued the country's second-largest internet service provider at $120 million.

The deal fell over amid a global rout in technology stocks.