Non-U.S.-based Internet service providers are rapidly becoming high-valued properties for American carriers that seek to capitalize on the Internet opportunity overseas.
The idea was first made popular by Herndon, Va.-based PSINet, which started buying up small Internet service providers in Europe, Latin America and the Asia-Pacific region last year. Today, another Virginia-based carrier is unveiling an identical strategy, challenging PSINet for the No. 2 slot as the international ISP brand of choice.
"We are absolutely committed to the small and midsize business market," said Michael Simmons, president of Via Net.works. "We are the only international pure-play ISP out there - which is an absolutely untapped market."
The market opportunity that Via is pursuing is apparently great enough for a large group of top-drawer investors, including Telecom Partners, Norwest Equity Partners, Verio, First Union Investors and Chase Capital Partners, to put a whopping $180 million into the ISP. Today is the first time that Via, founded in 1997, is talking about its strategy in public.
Reston, Va.-based Via is expected to announce today 15 ISP acquisitions in Argentina, Brazil, France, Germany, Ireland, the Netherlands, Portugal, Spain and the U.K. Each carrier that Via has bought is locally managed and keeps its local brand. Simmons wouldn't say how much Via paid for each ISP, but he indicated that Internet penetration in some markets has quadrupled over the past 18 months, pulling up valuations.
"You can't put a price on the local talent that had the vision to establish and run these companies," he said.
Via's business case is simple. It lets acquired ISPs keep selling everything from consumer dial-up to high-end Web hosting, and it makes them more competitive by provisioning their long-distance bandwidth and standardizing back-office billing and similar functions. Via owns and runs its Trans Atlantic and Pan European STM-1 (155Mbps) backbone. Savings that local ISPs ring in make their margins better and improve overall profits. While Via execs wouldn't comment whether the company is in the red or in the black, they did say they are comfortable with where they are financially.
Simmons wouldn't comment on Via's exit strategy. One thing is certain, however: Verio is paying close attention to this new ISP. Verio was the only ISP included in the first round of investors, investing $8 million in Via.
"As a shareholder, they have access to the same kind of information that shareholders of publicly traded companies have access to," Simmons said. In other words, Verio, which holds a 5 percent stake in Via, knows everything there is to know about Via's plans.
This means that Verio might be harboring thoughts of acquiring Via or making it a strategic partner.
"Our strategy is to make investment in companies that we ultimately acquire a major stake in, but we also have investments in other companies that end up being strategic partners, like NorthPoint," said Matt Bell, Verio's spokesman. "We do not have plans to acquire Via at the present time."
Between 1996 and 1998, Verio bought more than 50 ISPs in the U.S., making it one of the largest carriers in the country.