Stay up to date with notifications from The Independent

Notifications can be managed in browser preferences.

Outlook: Net gains for Energis

Friday 28 August 1998 23:02 BST
Comments

PAUL SYKES, the dour Yorkshire entrepreneur who has vowed to go to the barricades fighting British membership of the single European currency, had a few more pennies to spend on his probably futile campaign yesterday after selling his internet business, Planet Online, to Energis for an astonishing pounds 75m.

For Energis, this is a somewhat counter cultural purchase since, unlike the rest of the group, and most other internet businesses, Planet Online actually makes money. All the same, Energis is paying a very full price for its slice of tomorrow's world. It works out at pounds 500,000 per Planet Online employee, three times last year's sales and nearly 150 times profits. Then again, this has got nothing on Energis, which valued at pounds 1.3bn by the stock market, has yet to poke its head above the red ink.

The fit is undoubtedly a good one. Energis already carries some 40 per cent of UK national internet access traffic and Planet Online operates in exactly the same corporate part of the communications market as Energis, offering businesses a range of intranet and internet services. Its clients include us at the Independent. The opportunities for cross selling are obvious while the acquisition adds another string to the bow of value added telecommunications services Energis can offer its corporate customers.

Whether all this justifies pounds 75m is anyone's guess. The stock market, which received the news positively yesterday, seems to believe it does, but then the City is in love with the telecoms sector right now and, even in these turbulent stock market conditions, investors seem incapable of viewing it in anything other than a sunny disposition. Apart from poor old Ionica, that is.

It's easy to dismiss this as just the latest stock market fad, but it is a view not entirely without foundation. Telecommunications volume is growing like topsy. Since the causes of this are to do with the information technology revolution, rather than the business cycle more generally, the trend may not be unduly damaged by economic slowdown. Furthermore, there is a growing demand for value added, enhanced services, particularly in the corporate market. So the long-term outlook for this sector is a good deal rosier than most.

All the same, there's a faintly defensive air about this acquisition. Internet service providers are being snapped up all over the place, and mainly by other telcos too. Since internet traffic is such an important ingredient of Energis's present revenue base, this obviously poses a threat, forcing the company to itself engage in a little bit of vertical integration. In the scramble for position in this fast growing market, the risk of overpaying is all too obvious.

Join our commenting forum

Join thought-provoking conversations, follow other Independent readers and see their replies

Comments

Thank you for registering

Please refresh the page or navigate to another page on the site to be automatically logged inPlease refresh your browser to be logged in