Magnet nets business ISP

13 Feb 2006

Magnet Networks has agreed to acquire Netsource in a deal that the company claimed will make it the third largest business ISP in Ireland behind Eircom and BT.

The deal will be subject to approval by the Competition Authority, not because of market dominance issues but because Magnet is considered as a media company and as such it can’t acquire a telecoms provider without the Authority’s consent. This is believed to be a formality and should take a matter of weeks.

The purchase price has not been disclosed but it is understood to be several million euro. There will be no job losses following the acquisition: Netsource’s staff of around 20 people will become Magnet employees. Netsource founder Tom Kelly, a veteran of the Irish internet sector, will take up a new role as director of market development for Magnet Networks.

Privately held Netsource was founded in 1995 and was originally called Club Internet. It has built up a client base of more than 4,000 SME and corporate customers around Ireland including Ernst & Young, Allianz Worldwide Care, Boyne Valley Foods, Alphyra and Dublin Port.

“Netsource is well run and well put together. It has great sales reach, has been around a long time and has built up a loyal base of customers,” said Charlie Ardagh, marketing director with Magnet Networks. “The team that is coming over is a big part of the value of the company they’re experienced.”

Ardagh added that Netsource customers would be moved to Magnet’s unbundled local loop network, which would allow the company to offer them a range of new telecoms and internet services such as faster download and upload speeds, outsourced PBX and voice over IP.

Magnet is investing €65m in unbundling the local loop, putting its own equipment into telecoms exchanges owned by the incumbent operator Eircom. Ardagh told that the company is about two thirds of the way through its target of unbundling up to 50 exchanges.

This process should be completed over the next two months and will give Magnet Networks coverage throughout the major urban centres in Dublin, Cork, Galway, Limerick and Waterford. “The network will service all of the businesses in those cities and 700,000 homes,” he said.

According to Ardagh, the acquisition last year of Leap Broadband by Magnet Networks’ parent company Columbia Ventures Corporation means that people living in rural areas or outside the unbundled national network could be reached via wireless technology.

By Gordon Smith