Demon Internet, Britain's oldest dialup ISP, is seeking to sell up to 49 percent of its stock to find what the company calls "a strategic partner for the company's next phase of development."
"We are entering a new era for ISPs in Europe," says spokesman James Gardiner. "We want to stay Number One when European telecommunications deregulates." Demon refused to confirm or deny a rumor published in Tuesday's Financial Times that Deutsche Telekom may be potential partner.
Like many ISPs, Demon has always struggled to keep its equipment and facilities growing as fast as its user base, which has nearly doubled in the past year while its staff tripled to 300-plus. But equally important as accommodating a larger clientele is the imperative to offer worldwide dialup - the most significant service lacking from most European ISPs. If Demon, which already operates a subsidiary in the Netherlands, could solve that problem, it would have a chance of becoming the only non-US global supplier.
Demon, which currently claims more than 100,000 paying dialup customers at its standard price of £10 a month and also sells leased-line corporate access, projects £20 million in pre-tax profits over the next two years, but is operating in an intense and unstable market in which few are making money. Gardiner points out that other than investment - last year the company installed a 45-Mb link to the US - Demon has been profitable.
What's different about Demon is its cachet as a grassroots access provider. When it started in June 1992, the UK's online market was largely CompuServe, the electronic conferencing system CIX, and, focusing on the corporate market, Pipex. Demon was founded in a CIX conference, where managing director Cliff Stanford recruited 200 people to fork over £120 up front for a year's service.
Merging with a large corporate partner would undoubtedly kill much of Demon's special "Internet" feel. But given the conditions of its market - with native competitors like BTnet, UUNet Pipex, and Internet Technology Group and additional foreign competition from Netcom and IBM, as well as AOL, CompuServe, and MSN - Gardiner says, "It's imperative that Demon has the right strategic partner."
