Bandwidth price wars push sale of Iprolink

By ADAM GIFFORD

Internet service provider Iprolink looks likely to be in overseas ownership by the end of the month as Newcall Group sheds its New Zealand telecommunications operations.

Newcall, a predominantly Thai-owned company which got a New Zealand stock exchange listing through a 1998 reverse takeover of cashed-up New Zealand Salmon, is selling its 20,000 telecommunications customers to TelstraSaturn.

Chief operating officer Guy Pierce said that without the telephony business, it did not make sense for Newcall to own an ISP. It bought Iprolink a year ago for $3.6 million.

Mr Pierce said the favoured bidder was an international ISP - not in this country - which was building a global network.

Iprolink chief executive Paul Speary said the ownership change should mean enhanced services for customers, a process already started.

He said Iprolink, which targets business customers with a high-availability service, doubled its business customers to 3000 in the past six months despite falling bandwidth revenue. But growth had slowed because of the Telecom, Clear and TelstraSaturn bandwidth price war.

Iprolink recently started offering the Telecom Jetstream ADSL service, although it cannot guarantee service levels because the traffic must be routed through Telecom's pipes.

"We gave up waiting for Telecom to come out with the wholesale deal for ISPs they promised. They have taken ADSL to market and grabbed the cream, and the rest of us are trying to catch up," he said.

The sale of Iprolink and the telecommunications customers will mean Newcall's business in NZ will be its 75 per cent shareholding in electricity reseller Energy Options (EOL). Over the past year EOL's customer base grew from 300 to 10,000.

Its telephony business is now concentrated in the newly-deregulated Singapore market, where it is selling prepaid phone cards and installing switches so it can offer its own connections and business services.

Mr Pierce laid off 15 Newcall staff yesterday, leaving about 20 in its Khyber Pass headquarters. That number could shortly drop to just the administration staff needed to handle Group and stock exchange issues.

"The Thai board probably sees things moving to Singapore quickly," Mr Pierce said.

"Once the switches are running, the company may seek a listing there."

He said the board was bullish about EOL's prospects, and saw it moving into other markets as they deregulated.

Mr Pierce said Newcall also considered its SLM billing system, which is used by EOL, to be an asset which could be developed further for sales to other telecommunications and utility companies.

SLM combines an internally built customer information system with a calculation engine licensed from French company Idea Systems.

Early last year, Newcall predicted it would be trading profitably by the end of the year.

But the three big telecommunications companies' price wars had slowed growth, with significant customer churn, Mr Pierce said. People had lost confidence in telecom stocks worldwide, and he could not ask shareholders for more money.

The Government's watered-down response to recommendations from its telecommunications inquiry was the last straw.

"It gave no direction on pricing and unbundling of the local loop. If we could go out and resell lines, it would free things up considerably."

Mr Pierce expects to see further consolidation in the telecommunications market her as smaller players drop out.

"People will switch to those companies putting the hardware in the ground.

He with the infrastructure and the deepest pockets wins."