Pacific Internet Limited

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Pacific Internet Limited

UNIVERSITY NETWORK ORIGINS IN 1991

BUILDING AN INTERNATIONAL NETWORK IN 1999

LEADING ASIAN INDEPENDENT ISP FOR THE NEW CENTURY

UNIVERSITY NETWORK ORIGINS IN 1991

Although Pacific Internet grew into one of the most international of the Asian-Pacific region’s independent Internet service providers, its origins lay in the creation of a small in-house network for the National University of Singapore’s research and development activities. Created in 1991, TechnologyNet, also known as TechNet, operated as a closed network for the university’s academic community, under the guidance of the National Science and Technology Board of Singapore. TechNet was also granted one of only a few Internet access licenses awarded by the Singapore government during this time.

By the mid-1990s, the rise of the Internet, spurred on the by the creation of the World Wide Web graphical interface, clearly pointed the way of the future for the telecommunications market. A number of new players in Singapore became determined to enter this market, including the city state’s telephone monopoly,

Singapore Telecommunications, and its cable television operator, StarHub, among others. The market for Internet services also attracted a number of the state’s major corporations. Among them was conglomerate Sembawang Group, which, through its venture capital SembVentures (later SembCorp Ventures), established Sembawang Media to develop a number of Internet-based interests. SembVentures also targeted the ISP market directly, and in 1995 bought TechNet and its Internet access license. By September of that year, Sembawang Media had readied the launch of the state’s first “telco-neutral” ISP, Pacific Internet Corporation Pte. Ltd. (PacNet).

PacNet quickly expanded its ambitions beyond Singapore, in part because of the market’s limited consumer population and the presence of state-controlled incumbent Singapore Telecommunications, as well as the low initial Internet penetration rate in the country. The company also recognized an opportunity to establish itself as an early player in what promised to become a highly international market, especially in the Asian-Pacific region. In 1996, therefore, PacNet targeted the Hong Kong market, buying a 50.1 percent stake in Pacific Supernet Ltd., also held by Sembawang. PacNet later increased its holding in Pacific Supernet to 100 percent, at which time the Hong Kong operation was rebranded under Pacific Internet. Back at home, PacNet launched the country’s first cybercafé, providing wireless Internet access at a site on Boat Quay in 1996.

PacNet next targeted the Philippines market, forming a joint venture with that country’s Prime World Digital Systems, which had pioneered the Internet market in that country, in 1997. The following year, PacNet acquired a 40 percent stake in Prime World, which then changed its name to Pacific Internet Philippines. By the middle of the first decade of the 2000s, the Philippines unit had readopted the Prime World name, while PacNet had increased its equity stake to more than 53 percent.

In the meantime, interest in the Internet was building rapidly among Singapore’s consumer and corporate markets. PacNet became a major beneficiary of this interest, and through 1998 the company’s subscriber base grew by more than 75 percent. At the end of the year, PacNet boasted nearly 187, 000 dial-up subscribers, representing nearly 40 percent of the total subscriber market. At the same time, success in both the Hong Kong and Philippines markets encouraged the company to target further international growth. PacNet’s sights fell on the vast Indian market, launching negotiations with a local partner to enter the newly deregulated market there.

BUILDING AN INTERNATIONAL NETWORK IN 1999

Seeking funding for its expansion goals—which included plans to expand into Australia, China, South Korea, Indonesia, Taiwan, and elsewhere in the region—PacNet became the first Singapore ISP to list its shares on the NASDAQ in 1999. The move was meant to tap the international investment community’s growing interest in the Asian telecommunications market in general, and the Internet sector in particular. As growth in the relatively mature U.S. market slowed, the Asian markets, expected to grow by more than 500 percent into the early 2000s, represented an extremely attractive market for investors.

The successful public offering, and a secondary offering just five months later, enabled PacNet to expand rapidly into the year 2000. The company launched its operations in India, forming a partnership with Thakral Brothers (Pte) Ltd. to extend its global roaming services to that market in May 1999, before launching full commercial Internet services there in 2000. By then, PacNet had also expanded into Australia, buying that country’s Mira Networking in May 1999. That purchase was followed by the acquisition of another Australian Internet provider, Zip World, in June 1999. At the beginning of 2000, PacNet boosted its Australian presence again, purchasing Kralizec Pty Ltd. and its Zeta Internet ISP unit there. That company, originally formed in Sydney in 1985, had been one of the first in the country to launch commercial Internet services in 1994.

PacNet continued to build its Australian operations through 2000, notably through the acquisition of Hub Communications Pty. Ltd. in February 2000. That company, founded in 1995, provided Internet access services for the Brisbane area, and also operated a chain of Internet cafés in Brisbane. Following the launch of ADSL-based broadband services in Australia, PacNet added again to its holdings there, buying Newcastle-based Hunterlink Pty, the leading ISP in the Hunter Valley region.

COMPANY PERSPECTIVES

Our Vision: To be the trusted brand for Internet Communications Services.

At home, the Singapore company faced rising competition, notably with the entry of StarHub into the ISP market. Nonetheless, the company continued to build strongly, and consistently won the Computer World award for “Best ISP in Singapore” and even the award for “Best Asian ISP.” The company began rolling out its broadband services in Singapore and Hong Kong. In 2000, also, PacNet launched its own web portal, Pac-Fusion, which developed into the most frequently visited site in Singapore by the end of the decade. The company had also been building up its range of content and services. In 2000, the company paid $5 million for an 85 percent stake in Internet travel services provider Safe and Mansfield. That business was redeveloped into the company’s Safe2Travel web site. At the same time, PacNet formed a partnership with Standard Chartered Bank to provide online banking services. Other partnerships included deals with financial services group Goh-Direct, web-based e-mail services through Webmail.com, and online wine sales through WineSong.

LEADING ASIAN INDEPENDENT ISP FOR THE NEW CENTURY

PacNet extended its international reach again in 2000. The company formed a subsidiary in Thailand, Pacific Digiway Ltd., which in turn acquired a 49 percent stake in Bangkok-based ISP World Net & Services Co., which then adopted the Pacific Internet brand. PacNet’s stake in that operation was later raised to 74 percent. Also in 2000, PacNet made preparations to enter the Malaysian market; the company commenced full-scale services there in 2002.

By the middle of 2000, PacNet counted more than 312, 000 dial-up subscribers, and a steadily growing number of broadband customers as well. The latter market became the hottest Internet growth market leading into the new century; at the beginning of 2001, PacNet had become the first in Singapore to launch unlimited Internet access via broadband. By the end of the year, the company had introduced wireless broadband services as well, and had created a partnership with Hutchison Max Telecom to provide Internet access to its Orange mobile telephone customers. The company also increasingly developed a range of services for the corporate market, such as the creation of a data center in Singapore in 2001, at a cost of SGD 5 million. The company also launched Smart-Lan services that year.

Pacific Internet’s expansion drive nonetheless came at a cost. By 2001 the company’s losses for the year neared $7 million on revenues of $76.4 million. Yet the company’s losses proved temporary as the growth of the broadband market in particular helped it return to profitability by the end of 2002. In Singapore, PacNet extended its broadband reach into the cable television market. The company also began testing its Powerline service, in order to supply Internet access through the electrical utility network, primarily to remote regions with no telephone access. In 2005, the company teamed up with Internet-based telephone company Skype to provide VoIP services for its Singapore customers. Similarly, the company made a new acquisition in Australia, acquiring T3 Communications in 2005, in a move to strengthen its provision of bundled telephony and broadband services to the Australian small- and midsized business markets.

PacNet increasingly began targeting interests in the fast-growing mainland China market. The company had already begun to supply corporate Internet services to that market through its Hong Kong operations. In 2002, for example, the company launched BizVoice, providing IP-based communications services between Hong Kong-based companies and their mainland offices. The company also developed Chinese-language versions of its online gaming platforms.

KEY DATES

1991:: TechnologyNet (TechNet) is created as closed academic network for the National University of Singapore.
1995:: Sembawang Group acquires TechNet and its Internet service license and relaunches it as commercial Internet service provider Pacific Internet PacNet).
1996:: Company completes its first international expansion, into Hong Kong.
1999:: PacNet lists its shares on the NASDAQ.
2005:: Company forms joint venture with Zhong Ren Telecom to launch integrated IP communications services in southern China.
2006:: PacNet announces plan to establish data center to serve mainland Chinese market.

By 2005, the company was ready to enter the mainland market directly, forming a 50-50 joint venture with Zhong Ren Telecom to develop and market an integrated IP-based communications service for the southern China market. By December 2006, the company had announced plans to expand its mainland presence with the launch of data center services there. Targeted at the corporate market, the company expected the new data center to serve as a bridge between its northern Chinese and Hong Kong operations, and the southern Chinese market.

By the beginning of 2007, PacNet had established itself as a leading telco-independent Internet group for the Asian-Pacific region. The company’s early move into broadband access played an important part in its growth, and by the end of 2006 already accounted for more than 47 percent of total revenues. With an average penetration rate of just 10 percent throughout the Asian-Pacific region, and as low as just 4.5 percent in such major markets as India, Pacific Internet’s international network strategy could look forward to strong growth in the years to come.

M. L. Cohen

PRINCIPAL SUBSIDIARIES

Hunterlink Pty Limited (Australia); Pacfusion Limited; Pacific Internet (Australia) Investment Pty. Limited; Pacific Internet (Australia) Pty. Limited; Pacific Internet (Hong Kong) Limited; Pacific Internet (Malaysia) Sdn. Bhd.; Pacific Internet Corporation (Hong Kong) Limited; Pacific Internet Corporation Pte Ltd.; Prime-world Digital Systems, Inc. (Philippines); T3 Communications Investment Partners Pty Ltd. (Australia); Zip World Pty Ltd. (Australia).