Telecom Eireann has made its first significant entry into the commercial Internet market after taking a 90 per cent shareholding in Local Ireland, a fledgling Internet site created by Irish company, Nua. As part of the deal, Telecom also takes a 20 per cent stake in Nua.
The total investment is thought to be valued at more than £5 million, with Telecom paying £1.3 million for its stake in Nua, and further investment of £4 million over two years in Local Ireland. Telecom has been providing Nua with "moderate" financial support over the last 18 months.
While the precise structuring of the deal is not being revealed, Mr Gerry McGovern, Mr Anton O Lachtnain and Mr Niall O'Sullivan, will be the chief beneficiaries of the investment, with each respectively holding a 40.5 per cent, 36 per cent and 13.5 per cent stake in Nua, which was founded in September 1995. Enfor Scientific holds the remaining 10 per cent. Forbairt has 5 per cent in convertible preference shares - shares which can be converged into ordinary shares in the future.
Following the Telecom investment there is likely to be a further issuance of shares to three senior Nua employees and its chairman, Mr Ossie Kilkenny, financial advisor to the entertainment industry.
According to Mr McGovern, chief executive officer of Nua and Local Ireland, the deal should increase Nua's workforce from 34 to over 100 by 2002. Local Ireland, which currently employs 7 people, will grow to about 45 people over the same period. If successful, Nua expects conservative annual revenues of about £5 million, and it may opt for a stock market flotation within the next two years.
"Through this model, we create the architecture for storing information, while local partnerships drive the content and create a cohesive market place." Local Ireland's attraction for Telecom is the platform it provides for global exposure and advertising revenues on the Internet. It is loosely modelled on successful US sites which act as gateways to the Internet, including Yahoo, America Online and CitySearch. Developed over the last three years, it centres around the ideal of online communities, and a network of county co-operatives.
Detailed information about Ireland's Internet offering will be filed in 6,000 categories, and will be searchable on a national, county and local level according to a strict architecture. Because the Local Ireland model sorts information before it goes on the Internet, it will be easier to find as it has to be categorised in advance. Revenues will be generated through commissions paid to Local Ireland and county co-operatives for online transactions through the site, as well as online advertising. Its central objective will be to represent the first place people think of when they want to search for anything to do with Ireland on the Internet.
Mr McGovern sees an international franchising potential in the Local Ireland model which he plans to address in about six months time.