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Dated: 1 November 2002
Infochannel Group, one of some six local internet service providers (IPS) is on a buying spree, gobbling up the competition, a move chairman and CEO, Patrick Terrelonge describes as a win-win situation.
He believes the buyouts will provide the Group with an opportunity to become more cost effective and provide customers with high speed, broadband internet services, with speeds up to 30 times faster than the current dialog approaches.
So far, he has acquired two of his competitors - the internet access business of World Telenet and Jamaica On-Line (jol.com). But armed with a budget of $150 million, this is not the end of the buying spree. He said, “We are in discussion with others with the view to acquiring them as well. I hope to come to some conclusion on that within a month”.
Growth through acquisition broadens product range and allows the firm to compete on many fronts, which is just what Mr. Terrelonge wants to add to the already leading activity of internet service. He said he is interested in competing in the lucrative domestic and international voice market.
He has also been talking to a number of cable operators with the view to developing a partnership with them or, possibly acquire their operation. And in anticipation of the full deregulation of telecommunications on the island, particularly voice, he stands ready to spend US$2M.
The primary motive behind the acquisitions is to grow the company. He projects revenue to jump by 50 per cent as a result. He said, “Growth achieves a number of things and the primary objective of using acquisitions is to grow the company more quickly than we would in an evolutionary way”.
Because of the greater critical mass and economies of scale which acquisition brings, Mr. Terrelonge is sanguine that the company would be able to produce higher quality products at a lower cost, and over time, introduce additional features to the products it offers its subscribers.
“It’s a win-win situation”, he said, adding, “we grow, we get more efficient, our shareholders will hopefully benefit, and most importantly, subscribers will benefit from a wider range of services at more competitive prices”.
Currently, Infochannel charges its customers a monthly subscription fee ranging between US$109 and US$670, and does its marketing through advertising and direct mail to some 2,000 potential customers. Mr. Terrelonge projects revenue to increase by 50 per cent a year as a result of the acquisitions and expects profitability to increase next year.
His business, which is a fusion of the telecommunications and information technology business has been the growth engine of several economies, and the range of equipment used has become a symbol of first world status.
In addition to standard computing servers, mini computers, networking computers, and telecommunications gear, such as switches and special kind of cabling, Infochannel has international satellite communications facilities, including its own earth station, which gives the capability to provide data communication links internationally. A number of organisations are known to be taking advantage of that capability.
Infochannel is a leader in IPS but Mr. Terrelonge wants it to be known for more than that. He wants a clear distinction made between his company and a purely IPS. “Currently, we regard ourselves as a communications services provider, which is different to what is commonly referred to as IPS”, he said.
He believes there are other services which are required in the Jamaican market other than data communications. The company has been providing voice communications but with an internet base, whereby the subscriber is allowed to use the internet to make voice communication possible. Very soon, Infochannel is to introduce fax communications with an internet base.
For the future, Mr. Terrelonge said they are taking a serious look at cable operations and domestic voice and wireless-based internet services. Infochannel, uses the Asynchronous Digital Subscriber Line (ADSL) platform. But getting to where he is at has not been easy. He had three major challenges to overcome.
For years, Cable & Wireless’ monopoly on voice communication had been a hot debate. He said, “When we started in 1995, although 1994 was the planning year, we recognised that the telephone industry and the regulations governing it were not business-friendly and therefore, not consumer-friendly, so we set out to develop a strategy to encourage deregulation”.
The second hurdle, he said, was financing, coming on the heels of the collapse of the financial sector and the near freeze in lending which followed. “It has been very difficult for local financing to be obtained for most businesses in the past 10 years and we suffered from the softness in that environment”, said Mr. Terrelonge.
Moreover, because of the monopolistic environment in which he was operating at that time, he said less attention was paid to them than they would have liked. On the other hand, he said they were dealing in a field with fast, dynamic, world-wide growth and attention, and eventually they got some financing to keep them going at the beginning.
Additionally, Infochannel had to deal with an uneducated consumer. Back in 1995, most people didn’t know what the internet was. “We did a survey in 1994, and found that less that two per cent of the population had even heard of the term. So we had to educate the market”, he said.
Relying on the world-wide hype that was starting to develop here in order to penetrate the local market, Mr. Terrelonge said, “We literally went from village to village, parish to parish, seminar to seminar, telling the people what the new technology could bring, and thankfully, many listened”. (insert pic labled patrick) caption: Patrick Terrelonge, Chairman and CEO of Infochannel Group.
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