Bankrupt ITI's network taken by Storm

By Phillip de Wet for storm

Johannesburg, 08 Sep 2000

Storm Telecom has announced its acquisition of ITI Corporate Access, the ISP division of the defunct ITI Technology Holdings, which is in the final stages of liquidation.

Storm says it will use the IP network and client base it gets with the deal to eventually offer converged voice and data, and may look at the possibility of applying for a telecommunications licence when Telkom's exclusivity ends.

This is a first step toward becoming a licensed IP network-based telecoms operator to corporate customers.
Tim Wyatt-Gunning, MD, Storm Telecoms

Such services would be illegal under current legislation, but Storm has always looked at the market after regulation, says MD Tim Wyatt-Gunning.

"The long term gain is to combine voice and IP products," he says. "This is a first step toward becoming a licensed IP network-based telecoms operator to corporate customers."

Barely legal

Storm is no stranger to legally controversial services. The company's main line of business is an international callback product which gives customers access to cheap international calls. Telkom lost a battle to have such services made illegal under its exclusive licence, but has since maintained that they were not above the law.

"Of course Telkom will say we are illegal," says Wyatt-Gunning. "I would probably do the same if I were the incumbent monopoly operator. But callback is not illegal, although the [Telecommunications] Act is rather unclear."

The ITI business, to be branded as Storm Internet, will be kept technically apart from the voice side for regulatory clarity.

"To avoid any nastiness from ICASA [the Independent Communications Authority of SA] or Telkom, we decided to separate the corporate structures," says Wyatt-Gunning. "We have also transferred the Storm VANS [value added network services] licence to Storm Internet."

Both companies will however be wholly owned by holding company STWS, which is based in the United Kingdom. They are also to share accounting and other support services, and will cross-sell to each other's client bases.

Although held in the UK, Storm operates only in SA, something Wyatt-Gunning says could change with possible expansion into Europe. For the time being, the company is looking for local partners.

In liquidation

Wyatt-Gunning says the purchase amount is confidential under the terms of the sale and included payments to creditors, but that the entire deal was conducted in cash. "They were under provisional liquidation when we started talking to them, so we needed approval from the directors, but we basically dealt with the liquidators."

The company is uncertain if it will apply for a telecommunications licence, as there is still no clarity on the number of licences the government intends to issue or the conditions that will come with them. Wyatt-Gunning says Storm would be happy to resell the services of a Telkom competitor as it intends to have a strong brand by 2003 when liberalisation is expected.

"The regulatory risk in this country is a risk for us of course," he says, but expresses "hopeful confidence" in the ability of regulator ICASA to keep the market stable.

The ITI division had its origins with Club Internet, which "outsourced" its dial-up clients to M-Web in an unusual deal in October last year in order to focus on the corporate side of its business. Club Internet founder Rob Fisher has joined Storm Internet as part of the deal.

Storm Telecom was founded by Wyatt-Gunning and Tim Parsonson, who holds the title of European director, in 1999, after they decided that the SA market would be attractive after liberalisation. "In Europe the players that got in early made it big," says Wyatt-Gunning.