Telecommunications group WorldCom is in talks with PostGEM, the An Post subsidiary about a possible buyout or a strategic alliance. PostGEM provides a broad range of electronic communications services in Ireland and also includes Internet service provider Ireland On-Line.
Industry sources say the talks are still at a preliminary stage and that it is unlikely An Post would sell the whole subsidiary, although WorldCom would favour a straight acquisition. However, a strategic alliance whereby WorldCom, would take 25 per cent or more is said to be under consideration.
WorldCom is one of Ireland's largest providers of telecommunications services to the corporate sector and is keen to expand its market.
Sources say PostGEM would provide such a vehicle. No price has been mentioned yet, but industry estimates say £10 million£15 million would be a realistic figure, depending on the stake WorldCom gets. An attraction for WorldCom would be access to Ireland On-Line (IOL) which now has 40,000 customers. Although seen as more orientated towards the residential market, it has said 70 per cent of its subscriptions are paid for by businesses.
PostGEM needs to develop IOL and needs to get into Internet telephony, but the company doesn't have much experience in it. Internet telephony is expected to form a major part of future development in telecommunications. PostGEM also needs international connectivity to give the bandwidth and technical support. At present the company uses UUNET Technologies, which is the Internet of WorldCom, so the WorldCom investment in PostGEM would be a logical next step in the development of the An Post subsidiary.
PostGEM needs to be developed and to provide international voice services, otherwise the value of the company will eventually fall. At present, WorldCom carries traffic for PostGEM on its international network.
WorldCom and PostGEM are understood to be currently finalising arrangements under which PostGEM will distribute some of WorldCom's services such as international frame relay services used for the transfer of high-speed data.
It is not known how much the An Post subsidiary makes each year, or if it is in profit. An Post, in common with other State companies consolidates its operations into its profit and loss account. However, Ireland On Line, which employs 75 people is expected to break even for the first time this year.
WorldCom bought out TCL Telecom last year for an undisclosed figure. The US-based global telecommunications group is an acquisitive one. Last year it was involved in the biggest over takeover of a telecoms company when it bought MCI for £24.6 billion.
WorldCom declined to comment yesterday. A spokesman for An Post denied that any negotiations with WorldCom were taking place.
