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October 1, 1998

PSINET BUYS TOKYO INTERNET, CLAIMS NUMBER TWO SPOT

By CBR Staff Writer

PSINet Inc has made its third acquisition in Japan, which it says will now make it the country’s second-largest ISP serving corporate users. The Herndon, Virginia-based company has bought Tokyo Internet Corp from its parent company Secom. In addition, PSINet will work with Secom to form a public key infrastructure alliance using Secom’s technology. As talks between the two are still ongoing, PSINet was reluctant to commit itself to how the deal might manifest itself, but it could range from a marketing alliance to a joint venture. The terms of the acquisition were not being disclosed, but PSINet apparently paid for the ISP with a small proportion of the proceeds from its $600m debt offering earlier this year (04/15/98). PSINet says the addition of Tokyo Internet’s 6,000 or so leased line, co-locate, web hosting and dial-up subscribers should add $35m to its top line. The bottom line is less clear, as all PSINet will say is that the acquisition will be accretive to its EBITDA (earnings before interest, tax, depreciation and amortization) which is a fairly meaningless measure of a company’s profitability. We could assume that on a net basis, it will either make no difference or add red ink to its bottom line, although PSINet says it has not been evaluated yet. Earlier this year PSINet acquired two Japanese ISPs, Rimnet Corp and Twics Co Ltd. Tokyo Internet’s IP network infrastructure links 23 cities. It set itself a target to get into the top 20 telecoms markets and has thus far penetrated 12 of them. It is still looking for independent ISPs that don’t have the financial resources to expand their networks, so we can expect further acquisitions in the near future. PSINet closed yesterday down $1.1875, or 8.5% at $12.75.

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