Australian ISP OzEmail looks for $US250m in foreign backing

From australia.internet.com

OzEmail, the largest independent Internet service provider in Australia, is looking for $US250 million dollars in equity from outside Australia to finance major investment in cable infrastructure.

The cash will fund the laying of fibre-optic cable within and between
Australian cities, and will buy a stake in the Southern Cross Trans Pacific
Cable, the company said.

The new equity will be sought through the issue of up to 50 million
ordinary shares, subject to shareholder approval. OzEmail’s current share price is hovering just below 20 (NASDAQ: OZEMY), and the cash injection would double its market capitalisation.

One of the aims of the move would be to provide “value-added
telecommunications services,” a phrase which would sound alarm bells for
the two major incumbent cable providers, Telstra and Optus. Telstra, which is two-thirds owned by the Australian government after a public float earlier this year, and Optus, which is majority-owned by Cable
& Wireless, have investments in hybrid fibre coaxial (HFC) cable
infrastructure in Melbourne and Sydney worth several billions of dollars
each.

The two carriers run competing pay-TV channels over their HFC networks, and
Optus will compete with Telstra later this year by also offering broadband
consumer Internet services on its cable network.

Telstra is already competing with OzEmail as an ISP, with the former’s Big
Pond division being number two behind the latter on numbers of subscribers.
OzEmail also reported a $AUS3.3 million loss in the second quarter of 1998,
down from $AUS4.3 million in the first quarter, and $AUS8.3 million in Q4
1997.

The company stated it has been performing poorly on earnings, due to one-off charges
relating to last year’s acquisition of rival ISP Access One, and the
establishment of its Internet telephony subsidiary Interline, but CEO Sean
Howard said it was “beginning to see the benefits of our strategy.”

Earnings before interest, taxation, depreciation and amortisation (EBITDA)
were $AUS1.9 million, a $AUS2.5 million turnaround from the previous
quarter.