CNET también está disponible en español.

Ir a español

Don't show this again

Tech Industry

Netcom, ICG to merge

Netcom, one of the few remaining big independent ISPs, has merged with telecom provider ICG Communications.

    ICG Communications (ICGX), a competitive local exchange carrier (CLEC) announced today a plan to merge with Netcom Online Communication Services (NETC), one of the few remaining big independent Internet service providers.

    Under the terms of the agreement, Netcom stockholders will receive ICG stock worth about $22.65 per share of Netcom stock. Based on the closing price of ICG common stock on October 10, 1997, the value of the transaction is approximately $285.5 million. The $22.65 per share price for Netcom stock represent a 50 percent increase to Friday's closing price of $15.125 for Netcom shares.?

    The merger is expected to close in the first quarter of 1998, pending approval by the stock holders of both companies and other regulatory entities.

    The combined company is expected to have more than $420 million in quarterly annualized revenue based on second quarter results.

    CLEC's are local phone companies that hope to attract business from Baby Bells and other established local carriers. ICG, of Engelwood Colo., has been regarded as among the weakest of the CLEC companies.

    The merger takes place at a time when analysts are predicting a consolidation among ISP's, with the surviving Internet-access companies likely to be smaller companies that offer more specialized services.

    Earlier this year, GTE Corp. acquired BBN Planet, Intermedia purchased Digex and World Com acquired MFS communications, a company that had just purchased UUNet Technologies, one of the largest operators of local Internet-access points in the world.

    "The merger of ICG and Netcom offers a strategic fit across-the-board in technology, target markets and geography ," said J. Shelby Bryan, president and CEO of ICG, in a statement. "The new company will enjoy a particularly strong competitive advantage in California, where approximately 30 percent of the world's Internet traffic either originates or terminates. ICG is fully committed to serving this market, and we expect to have at least 3,000 fiber miles in service in California by the end of the year."

    The combined company will take advantage of the significant geographic overlap of ICG's and Netcom's respective customer bases. Currently, about 50 percent of Netcom's customers are located in ICG's existing network territory and more than 140,000 Netcom customers are located in California where ICG has its largest statewide fiber optic network.

    "It is significant that over 50 percent of Netcom's current operating costs are for line charges and related telecommunications services," Bryan added. "Consequently, as we transfer Netcom traffic to ICG's growing network, we expect to achieve cost savings that will improve operating margins and enhance cash flow of the combined company."

    Chairman and CEO of Netcom, David Garrison, said in a statement: "With the addition of Netcom's Internet and Web services, ICG -when our companies combine- should be an in an even stronger position to compete with local phone companies for market share."

    Netcom provides Internet connectivity and Web-hosting services as well as a suite of software applications targeted at small and mid-size businesses. It has a total subscriber base of approximately 550,000 customers.

    ICG offers local, long-distance and enhanced telephony and data services in California, Colorado, the Ohio Valley and parts of Southeastern United States.