Internet suitor remains dark figure

By MICHAEL FOREMAN

Internet company ihug yesterday continued to refuse to comment on the imminent sale of a stake to an unnamed partner, which may value the company at $150 million or more.

Ihug director Tim Wood said yesterday he had no comment to make and was "not sure" when he could make an announcement.

However, an investment banker, who did not wish to be named, confirmed to the Business Herald that his company would be "handling the transaction."

"An announcement is still a way off," but he was "comfortable" that it would be made this month.

The chief executive of a rival internet service provider pointed out that ihug would be especially anxious not to make a premature announcement as a proposed 30 per cent sale to Sky "had gone asunder" after it was announced last year.

That sale would have valued ihug at $100 million, but the company may now be worth considerably more.

The forthcoming float (IPO) of Australia's fourth-largest service provider, TPG, has been reported as valuing it at $A150 million ($193 million). With 115,000 users, the TPG float value equates to around $A1300 per subscriber.

Telstra's bid for Ozemail's 370,000 consumer users valued them at $A950 per head.

As ihug now boasts 100,000 users in Australia and New Zealand, these figures point to a figure of around $130 million to $167 million for ihug's retail internet operation alone.

However, ihug is also a significant wholesaler of internet bandwidth in Australia, and its SatNet satellite internet service, digital television and online travel businesses must be added to the equation.

Industry speculation yesterday centred on the identity of ihug's investment partner, with guesses ranging from Softbank-controlled Asia Online to MCI Worldcom, whose Uunet subsidiary is attempting to sell Australian service provider Ozemail to Telstra.

MCI Worldcom's chief executive in Australia, Jenny MacDonald, refused to comment on the question as it was "industry speculation" but Hugh McKellar, managing director of Iconz, which is owned by Asia Online, said his parent company "could be ruled out."

"If it's happening I certainly don't know anything about it. I'd like to know who is buying into ihug."

Ihug's recent decision to remove a banner advertisement for online retailer FlyingPig.co.nz from its web site sparked suggestions that the investor would be retail based.

E-ventures, owned jointly by Rupert Murdoch and Softbank, was named as a likely contender, which would use ihug as the vehicle to launch a New Zealand version of the US-based buy.com site.

However, E-ventures chief executive, Cindy Mitchener, denied the deal was about to take place.

"E-ventures is not engaged in discussions with ihug at this time."

Stefan Preston, chairman of Orion Ventures, which owns FlyingPig, said he would welcome the competition should ihug ramp-launch a major online retail operation.

"We wish them good luck," he said, but he warned ihug "would have its work cut out to handle the logistics."

FlyingPig's experience showed that a website was "but a very thin veneer" to the business of delivering goods to customers.

However, an overseas partner would ensure that ihug would have the very latest technology at its disposal.