RealTime IT News

Melbourne IT Goes to Market

Melbourne IT is about to follow Telstra's lead by cashing in on the Australian Stock Exchange (ASX) on its de facto monopoly on domain name registration for names ending with "com.au".

The company will profit to the tune of AUS$85 million (US$54 million).

The company's core business is selling domain names, in particular those ending with .com.au, denoting an Australian commercial organisation, for which it currently has the only license. Since November 1996, Melbourne IT, now operating its domain buisnes through a subsidiary called Internet Names World Wide (INWW), has registered 100,000 names for at least $100 each.

Re-registration occurs every two years, meaning a guaranteed annual income of $5 million -- and rising -- if the company can keep its customers.

Melbourne IT will list on the Australian Stock Exchange on December 14, offering 42.5 million shares representing 85 per cent of the company at $2.20 per share. The sole existing shareholder, a shell company called Melbourne Enterprises International which is a commercial subsidiary of the University of Melbourne, will make $85 million from the float.

The market capitalisation of the company would be $110 million, putting it second largest behind ecorp in the Internet sector on the ASX.

Like Telstra, Melbourne IT is already making a substantial and rapidly rising profit from its guaranteed income stream. Revenue is predicted to double year on year, with the company suffering a slip in its profit growth this year but expecting to shoot up in the year 2000.

The company has operated under a "non-exclusive" license to be the registry (to maintain the infrastructure) and the sole registrar (to sell the names) for all domain names ending with com.au since late 1996, but no other company has been granted a license.

Competition in the registrar industry has been discussed by various quasi-official industry organisations for many years, but it was not until this November that the man who had been delegated the policy and administration authority for the .au space, Robert Elz, gave away his authority to the industry, in the form of the au Domain Authority (auDA). Mr Elz is a researcher at the University of Melbourne.

Despite the importance of com.au to the company in the past, Prof Peter Gerrand told Internet World that registrations in the generic top level domains (gTLDs) like .com and .net, which now number 16,000 at a cost of $110 per name, are now outstripping revenue which MelbourneIT gains from the .au space.

"The com.au domain name registration business is but one of Melbourne IT's several lines of business, and our prospectus does not depend upon retaining our current de facto position as sole administrator of com.au beyond the timetable envisaged by auDA. Since October 1999 our monthly revenues from gTLD registrations have been higher than from com.au registrations. Thus our gTLD registration business is now our largest and highest growth business," said Prof Gerrand.

Other growth areas for INWW could include other 2LDs under .au like edu.au and gov.au. Prof Gerrand said several times during meetings to set up ADNA that he thought that the registration of names for educational institutions and government agencies should be commercialised in the same way as com.au and net.au (the registrar for the latter being Connect.com.au). Whether auDA agrees to this is still to be determined.

Melbourne IT is negotiating with a US-based start-up called RealNames to market the RealNames Internet Keywords System, which substitutes generic words for domain names. The company is also planning to sell VeriSign digital certificates, publish a paper directory of domain names, and customise its online domain name payments system to sell it under the name of ePayments.

Apart from domain names, Melbourne IT has a e-commerce systems integration and consulting business which was started in June 1999, plus a telecommunications software product development centre venture with Ericsson called Advanced Services Application Centre (ASAC).

The company also has relations with other companies in the "incubator" run by the University of Melbourne which has produced start-up companies like Interactive Worldwide, the four-year-old e-commerce integrator formerly known as Blue Tongue Online. Melbourne IT's research and technology group "works closely" with the University, although details of equity partnerships have not been disclosed.

The company will move out of the Carlton precinct which clumps the incubator firms near to their parent to a new address in the Melbourne CBD in December, and will open an American office using the proceeds from the float.