USKO, the fast-growing information technology services company, has filled a significant gap in its networked products offering through the acquisition of 100% of Global Internet Access (GIA), SA`s third biggest Internet service provider, in a cash and shares deal worth R80 million. "GIA is a wonderful strategic fit with USKO`s other communication-based operations namely Blue Sky Networks, Mediswitch and Sterling Commerce" said USKO Chief Executive Officer John Beck. In terms of the deal, USKO will acquire the 19,9% of GIA held by listed personal computer company Mustek, as well as all the shares (80.1%) held by GIA founders John Tollemache, Jon Oliver and Leon Gerber. GIA`s 180 management and staff will be unaffected except that they now qualify for the extensive share ownership plan which has been implemented throughout the USKO Group. GIA provides internet services to more than 200 corporate clients and over 26 000 dial-up users. For this base USKO paid approximately R2000.00 per subscriber with the remainder of the purchase price being used to acquire GIA's subsidiaries focusing on systems integration, content such as headlines.co.za, offshore operations etc. A recent market survey of internet service providers (ISPs) placed GIA in the top two in terms of quality of service. Having an ISP in-house will complement the local and wide area networking skills from Blue Sky and the electronic commerce capabilities within USKO to further extend USKO`s electronic business platform. Recent research suggests that the value of goods and services traded electronically will be R12 billion within two years, rising to R35 billion within five years. "Through Blue Sky Networks, Mediswitch and Sterling Commerce we are already a leading provider of electronic commerce solutions," says Mr Beck. "With more and more companies looking at doing business on the internet, we were looking for a solid, well-run internet service provider to which an USKO connection could add value." "USKO`s financial muscle, operating companies and corporate relationships will allow GIA to speed up its growth", says GIA managing director John Tollemache. "Once we started exploring the corporate market we found that there was such a demand for value-added services, but we did not have the means to meet the demand quickly enough. The deal with USKO means that we do not have to 'leave that business on the table' or compromise quality." Said Mr Beck "Companies are looking for single source solutions to their business problems. With the acquisition of GIA, USKO has a complete range of products and services to meet the most demanding needs of clients who want to do business electronically. This includes software development, security, internet access and intranets as well as conventional networking and transaction processing." GIA started as a value-added reseller of personal computers. "We began using the Internet to manage the business and to give technical support to our customers, but it soon evolved into a business in its own right," said Mr Tollemache. The founders sold the PC business to concentrate on providing dial-up internet access. Shortly after this, Mustek injected cash and its fledgling service provider business in return for a stake in GIA. However, competition between ISPs hotted up last year. "We were at a gunfight armed with less financial resources than our major competitors," says Mr Tollemache. However, Mustek decided that providing Internet access was incidental to its main business of supplying computer hardware. Together GIA and Mustek started looking for a more appropriate partner. "We were looking to be an integral part of a bigger business which could open doors for us, add value to what we had, and to which we could add something," says Mr Tollemache. The search, which included owners of all the major ISPs, ended a week ago with USKO. It is indicative of the chemistry between the parties that the deal was done at a discount to some of the other offers for GIA. "We may have been able to negotiate R15 million more from another company, but we would just have been part of their portfolio. We wanted a bigger role than that," said Mr Tollemache. The relationship between GIA and Mustek founder David Kan remains warm. Mustek will continue to supply items such as starter packs with GIA access included. The service ethic which sparked GIA`s genesis is what appeals most to USKO`s Beck. "It ties in exactly with the USKO ethic of providing excellent service over a long time, and using technology to add value cost-effectively," he says. USKO was also attracted by GIA`s entrepreneurial approach to business. Because it started early, GIA built its customer base at a fraction of the cost of that which organisations which recently entered the market are having to pay . In addition, it was the first SA ISP to offer international roaming on the internet. This means a GIA customer can call a local number in any of 180 countries to pick up e-mail and surf the World Wide Web. Even though some newcomers are offering attractive prices, GIA has lost almost no customers and has in fact continued to grow its base rapidly, despite the cost differential associated with a quality service. "We`ve never skimped on support and technology," says Mr Tollemache. "We`ve always had state of the art equipment and maintained a capacity at least 10% above what our customers peak demand has been. We`ve even guaranteed to give customers free access if they weren`t able to connect when they dialled in." Whereas most larger ISPs have built their own dedicated (and expensive) networks, GIA has a service contract with Telkom`s Internet access wholesaler, SAIX. "This is the way things are going overseas," says Mr Tollemache. "ISPs subcontract the supply and management of the network to telecommunications companies, agree service levels, and get on with providing value-added services." The value-added services takes GIA and USKO into two key revenue-generating areas - content provision and transaction processing. GIA already has a joint venture with Woza, the electronic news provider, which has links to Martindale Stacey and Turner, the leading network-based stockbroker, which handled share trades worth over R1 billion last year. For its part, USKO brings to the party Mediswitch, a transaction processing service for the healthcare community now being adapted for other vertical markets and the Internet. The GIA deal satisfies USKO`s appetite for companies which fulfil the overall crafted strategy, one of which is to put together a set of products and services which provide a single source for electronic solutions for business opportunities. Mr Beck says the acquisition will have minimal effect on USKO`s earnings for this financial year, but is expected to contribute handsomely in the medium to long term both directly and indirectly as part of packaged business commerce solutions offered by USKO. Beck adds, "through acquisitions and a concentration on organic growth USKO will maintain its drive to add significant value to its clients. We have the people, the business platform and the technology tools to meet our customers demands in the next phase of the market`s development and we want to maximise our market share whilst maintaining our profitability profile".
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