An Post may sell Ireland On-Line and PostGem as losses top £6.5m
AN POST is considering ditching its electronic and internet subsidiaries which have notched up losses of over £6.48m. Officially the State postal monopoly is seeking ``strategic partnership opportunities'' for its Ireland On-Line and PostGem electronic communication businesses.
Tenders for both business closed last weekend, and among the likely potential buyers are NTL, MCI Worldcom, Esat and Independent News & Media which publishes the Irish Independent.
Sources close to the sale process stated that An Post hopes to get £18m for both operations which are based at Dublin's Earlsfort Terrace and employ 140 staff.
A sale this autumn would be seen as a strategic reverse by An Post chief John Hynes, who had hoped to build a profitable electronic division on to the traditional post office, letter and parcel services.
Last year, Ireland On-Line produced pre-tax losses of £794,000 on total revenues of £4.87m. At the beginning of the year it had accumulated losses of £2.8m.
Its sister company, PostGem, reported a modest profit of £445,000 on sales last year of £9.65m Its accumulated losses at the end of 1998 stood at £3.65m. With overall losses of £350,000 for both operations, An Post has set its sights high if it is seeking an £18m valuation for its electronic arm.
That is broadly in line with both company's combined turnover this year.
Last March, An Post hired San Francisco consultants, Hambrecht & Quest, to look at future development and options for PostGem and Ireland On-Line.
Market sources regard the partnership prospectus as shorthand for a trade sale.
Ireland On-Line has been singled out for close attention with one source who has studied the company describing it in unflattering terms as ``an over-staffed basket case''. PostGem is now the largest internet service provider in the country.
It is run by Mary Mangan, who succeeded Jim Treacy with John Hynes as chairman. Two years ago, it bought Ireland On-Line but has yet to turn it round into profits.
An Post's strategy has been to develop a commanding presence in electronic mail to complement its existing post service referred to by e-mail advocates as `snail-mail'.
A spokesman for An Post yesterday said that no decision has yet been taken on the futures of both companies.
It is expected that the review by Hambrecht & Quest will be completed by September. Then the board and the Minister for Public Enterprise Mary O'Rourke will decide what options will be followed.
An Post does not release financial details on its subsidiaries, but the continuing losses and increased competition from the deregulated telecommunications sector may force chairman Stephen O'Connor to take a quick decision to off-load both PostGem and Ireland On-Line.