PSINet Inc, the Herndon, Virginia-based ISP says it will step up the pace of acquisitions this year and will start to look outside the top 20 worldwide telecommunications markets that it has been targeting for a couple of years now. Earlier this week the company announced that it had acquired two Brazilian ISPs and during the first quarter it bought two ISPs in France.
The company recorded first quarter net losses of $58.7m, up from $29.1m in the year-ago quarter. At the per-share level that translates into losses of $1.11 – nine cents better than Wall Street had expected, according to First Call. Revenues increased 135.5% to $104.8m. The company expects to break even on an EBITDA (earnings before interest, taxes, depreciation and amortization) level by next quarter, but neither the Street nor the company will predict when it might break even at a net level.
The company will start rolling out DSL services this quarter through a deal with Covad Communications Inc. Los Angeles will be the first market, with about 20 others to follow across the US through the rest of the year. PSINet says its deal with Covad does not rule out deals with other DSL providers in other markets. In Canada, one of the few countries in which PSINet operates a consumer business, it says it is struggling with its DSL roll-out due to the incumbent carriers pricing the service unfairly although it has managed some DSL roll-out in Toronto.
PSINet is getting very excited about the possibility of the data center market – its says the opportunities are extraordinary. The business has much higher margins than its traditional ISP business and it claims almost all of its small to medium business customers are asking for such outsourcing services. To that end it is building out a 100,000 square foot data center in London that will become operational later this summer.
The company had 59,700 corporate customers at the end of the first quarter, a 9.1% increase over the previous quarter. Average new contract value increased to $6,200, a $200 increase over the previous quarter and the retention rate is now 81%. The company has written to the International Chamber of Commerce in London requesting a review of its decision last quarter to award the Chatterjee Management Co, an investment firm owned by George Soros’ Soros Fund Management LLC $49m in damages arising from a joint venture in Europe that failed. PSINet says it thinks the ICC – the arbitrator in the case – made some mistakes in evaluating the deal, but it does not know whether or not it will get a review or what the outcome might be. However, it says the $49m one-time charge the company took in the fourth quarter of 1998 is the absolute ceiling of what it expects to pay (03/29/99).
