UUNET FACES CHANGE OF OWNERSHIP BY THE END OF THE YEAR

Internet

Internet service provider (ISP) UUNet may be facing a change of ownership towards year-end as its troubled parent MCI (formerly WorldCom) evaluates its investments in emerging markets.

MCI is due to emerge from protection under US bankruptcy (known as Chapter 11 protection) in August, following a plan accepted by 90% of the company’s creditors that will entail the conversion of some of its debt into equity, among other issues. The company has also undertaken a strategic review and has decided to focus on its core telecommunications services.

UUNet MD Dave Meintjies says that while the full impact of MCI’s decisions still have to be evaluated, it could mean that the ISP will be faced with a new shareholder or owner by year-end. The company has had four owners during its lifetime. MCI bought it in 2001 from SA IT group Datatec.

"Right now it is extremely difficult to predict MCI’s ultimate intensions as they are really focused on their own immediate issues and there is no concrete time frame. However, this will not affect the day-to-day operations of UUNet," he says.

Rand Merchant Bank (RMB) has been appointed by MCI to advise it on its African operations that are conducted in SA, Kenya, Botswana, Namibia and Zambia. It is not known when RMB will submit a report or finding to MCI.

While the MCI saga has affected UUNet in terms of being owned by the troubled telecommunications giant, it has had no real impact on the ISP’s operations or its customer base, which includes 2 000 corporations.

According to Meintjies, UUNet’s 2002 revenue jumped to R650 million from R383 million the year before. Customer churn has subsided substantially, giving the company a more stable client base.

"We are the largest of all MCI’s emerging market operations, however, we only account for about 0.3% of its total revenues. Furthermore, MCI has developed a very adverse risk policy that will almost definitely have an impact on its emerging market operations."

Meintjies says that for the time being, UUNet will continue to develop its client base and focus on expanding its services to the corporate market. This will include offering video conferencing facilities and document imaging facilities.

"What we are looking at is offering a corporate lifestyle service that will meet all the telecoms and Internet needs of companies. Our mobile communications services have shown strong growth," he says.

Other issues facing UUNet in the immediate future include deregulation of the telecoms market, the awarding of a second fixed-line operator licence in competition to Telkom and the maturing of the Internet market.

"A lot will depend on the advice given to MCI by RMB and it is just too early to say what form the possible change in ownership will take," Meintjies says.

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