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(Nikkei BP Group)

(No.1 High-Tech News Site in Japanese)

  • U.S.-Based PSINet to Acquire Japanese ISP Rimnet
  • August 31, 1998 (TOKYO) -- Rimnet Corp., an Internet service provider in Japan, said it will sign a financing agreement with PSINet Inc. of the United States.
    In September, PSINet will buy 100 percent of the stock held by Rimnet President Takashi Kobayashi and others. PSINet will take over Rimnet.

    Rimnet has been operating in the black for 12 years in a row. "We're certainly not losers in the ISP game in Japan," said Kobayashi. The decision to merge with PSINet, he explained, was because the company saw no hope of raising sufficient capital within Japan.

    "We did consider trading stock issues on the over-the-counter market, but decided against it in the end. Investment in venture businesses is undeveloped in Japan. And with business conditions being so bleak, we were not hopeful of raising financing to the scale we need -- and I'm talking many tens of billions of yen," Kobayashi said. Rimnet had reached an impasse, lacking the funds for further development.

    The need for such a huge injection of capital was because Rimnet had already taken initial steps toward becoming a Type-1 telecommunications carrier (common carrier), able to own its own network. Rimnet decided on that direction because of the growing popularity and increasing number of inexpensive Internet access services being offered by existing carriers such as Nippon Telegraph and Telephone Corp. (NTT).

    "We hadn't been doing badly as a venture business. But now, with the massively capitalized telecom companies spending vast amounts of money on ISP operations, it was clear we stood no chance. To offer the kind of high-quality, low-cost services that would enable us to compete, we needed to get our own network, by investing the same level of financing as the big carriers," said Kobayashi.

    So Rimnet started looking for companies that might provide financing assistance. Discussions were held with a number of prospective investors, but Rimnet decided in the end to form a capital tie-up with PSINet, which was already successful in setting up its own network in the United States as a venture business. Deciding factors in choosing PSINet were a similar direction in business strategy and a compatible company atmosphere.

    Rimnet's corporate structure will remain unchanged after the takeover. "From the point of view of PSINet head office in the States, Rimnet and PSINet's subsidiary in Japan will be like sister companies, operating on the same footing. PSINet will focus on corporate customers, while Rimnet will handle the individual consumer market," said Vincent Gebes, president of PSINet Japan KK.

    Rimnet's existing services, including its Internet access service and "RIM Phone" Internet telephony service, will also continue under the Rimnet brand. "The only thing that's changed is the stock ownership. There'll be no changes to service content. Customers will have exactly the same services as before," said Kobayashi.

    However, the backbone networks are set to change in a major way. In the future, PSINet will provide the international lines, while Rimnet will provide its own network for domestic connections. However, PSINet has only just begun the long process of obtaining a Type-1 license in Japan. Until that process is completed, PSINet and Rimnet will share the international lines to insure sufficient quality of service.

    On Aug. 24, PSINet opened six 45Mbps lines between Japan and the United States. Three of these will eventually be used as the international backbone, but probably not until the year 2000.

    PSINet decided on Aug. 3 to join a telecommunications consortium in laying a new undersea cable system, called the "Japan-US Cable Network," between Japan and the United States. The other carriers include Japan Telecom Co., Ltd., KDD Co., Ltd., AT&T; Corp., British Telecommunications Plc., Sprint Communications Co. and WorldCom Inc. When the cable system is completed, PSINet in the United States will connect with its Japanese subsidiary, which will share the line with Rimnet.

    No definite schedule is decided yet for the domestic network. However, the technology is very likely to be a Wireless Local Loop system, according to Kobayashi.

    (Nikkei Communications)

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    Updated: Fri Aug 28 18:21:22 1998 PDT