Traditional firms look to digital future

The business of providing high-speed internet access is typically associated with the excesses and volatility seen during the recent dotcom boom and bust. But as consumers and businesses finally begin to subscribe to broadband, there are signs that traditional businesses are again taking an interest in the telecoms industry.

The €18 million investment by National Toll Roads (NTR) and Kilsaran Concrete Products in the fixed wireless access company Irish Broadband is the latest example of respected firms investing in telecoms providers.

The IAWS co-operative, which has a 16.6 per cent share in NTR, recently invested in a start-up company called Axia that bid for a contract to manage the State's broadband networks, while a US entrepreneur who made his fortune from aluminium smelting in Iceland, Mr Ken Petersen, purchased a transatlantic cable linking the US and the Republic.

"There is a lot of money out there in the Irish economy, from companies and private individuals, that is looking for a home after 10 years of rapid growth. It is a new category of money that we can tap into," says Mr Tom Godfrey, a director at IBI Corporate Finance, which arranged the deal for Irish Broadband.

"There was strong interest in the deal and there has been a big change in attitude towards the telecoms sector in the past few years, away from the boom/bust to a good solid service business."

Irish Broadband, a young firm set up in 2002 by Mr Paul Doody and Mr Jeremy Nel and backed by NTR, is now valued at more than €30 million following its latest funding round. But how did it attract its blue-chip investors?

Founded in 1964, Kilsaran Concrete Products is one of Ireland's biggest independent manufacturers of concrete products and, at first glance, seems an unlikely investor in a technology firm. But the firm's most recent financial accounts show that it made profits worth €5.9 million in 2002 and has the financial muscle to diversify its business.

"The investment represents a strategic expansion of our traditional business which we believe puts us in a great position to reap the benefits of Ireland's future digital economy," says Mr Dermot McKeown, Kilsaran's chief executive, who has had business relationships with NTR, Irish Broadband's initial backer.

NTR also invested €9 million in the recent funding round and retains a 63 per cent stake in Irish Broadband. Its investment is part of a strategy to diversify into other infrastructure areas, such as water, energy and waste, since 1999, says Mr Jim Barry, National Toll Roads chief executive.

"We didn't see an opportunity in telecoms until 2002 when we saw a tipping point in the cost effectiveness and efficacy of fixed wireless technology... We think this technology will turn the whole industry on its head."

"This is very much a long-term investment for us. We aren't venture capitalists, we are business builders," says Mr Barry.

Irish Broadband is the largest of several Irish-based firms that provide high-speed internet services to businesses and consumers using wireless technology. Over the past two years, it has signed up 5,000 customers and generated about €3 million revenue in 2004, says Mr Jeremy Nel, the company's co-founder and chief operating officer, who worked previously for NTR.

"We now have 80 per cent coverage in Dublin and are already live in Galway and Cork. In January and February we will launch services in Dundalk, Drogheda, Limerick and Waterford... By the end of 2005, we should cover 85 per cent of the population."

The slow roll-out of fixed broadband and the recent emergence of improved wireless technology should help Irish Broadband to gain a foothold in the Irish market.

The firm has also teamed up with Intel, the world's biggest developer of wireless networking chips and a leading proponent of the emerging WiMAX standard for wireless broadband services, which can offer much faster download speeds over a much further distance than current wireless broadband technology.

"If you pass the litmus test with Intel, it gives you a huge amount of credibility, particularly with corporate customers," says Mr Nel, who has experience of setting up a similar wireless broadband firm in South Africa.

Analysts predict that WiMAX could remove the reliance on fixed lines for broadband services, which have been traditionally provided by firms over a state's national copper network or cable television networks.

Irish Broadband signed a deal with Intel last month that will see it deploy the first WiMAX equipment at the US multinational's Leixlip headquarters later this year when it becomes available.

Intel, which plans to manufacture the WiMAX chips required to build the new networking telecoms equipment to offer super-fast wireless broadband, will run its computers off the technology.

The base stations that Irish Broadband has built to beam broadband signals to Intel will also be used to deliver broadband to local businesses, schools and libraries, says Mr Nel.

A subsidiary of Irish Broadband based in Northern Ireland, which is called NTR Broadband, also has ambitious expansion plans across that region. The firm currently operates live base stations in Belfast, Derry, Strabane and Lisburn. It also has sites awaiting planning permission, including Omagh and Armagh. The objective of NTR Broadband is to have coverage all over Northern Ireland connecting homes and businesses to our network, says Mr Nel, who says the €18 million will be used to fund expansion.