The commercial ISP said stockholders overwhelmingly approved an agreement in which PSINet would get to use 10,000 route miles of IXC's OC-48 fiber-optic bandwidth in exchange for about 20 percent of PSINet stock. The vote, held at a special shareholder meeting in Herndon, Virginia, cleared the way for approval of the agreement, which was initiated last July.
PSINet said that the IXC bandwidth, which transmits data at 2.4 gbps, or about 50 times faster than current backbones used by ISPs, will generate significant cost savings and revenue opportunities.
"Our shareholders overwhelmingly supported the business plan set forth by PSINet and understand that this transaction is essential to its implementation," William Schrader, PSINet chairman, president, and CEO, said in a prepared statement. "With the addition of this significant asset, we increase the shareholder value of PSINet."
The company's stock, however, lost 12-1/2 percent today, closing at 7-7/8, down from yesterday's close of 9. The loss followed a 30-percent jump in the stock on Wednesday after a holding company, U.S. Internetworking, faxed an unsolicited $400 million bid for the Internet service provider.
PSINet rejected that bid yesterday, saying that the proposal was inconsistent with its business plan. The ISP also said that the proposal would have required PSINet to breach its agreement with IXC--a move the board had determined was not in the best interests of the company nor of its shareholders, PSINet said.
The first lot of the bandwidth allotted by the new agreement will be available to PSINet early in the second quarter of 1998. IXC owns and operates one of the newest nationwide digital networks and leases out its available network capacity to Internet service providers, as well as to telephone, cable, and utility companies.
The agreement also includes a long-term marketing arrangement, under the terms of which IXC will market PSINet's services.