Band-X Exits IP Market

One of the survivors of the bandwidth exchange business, Band-X Ltd., has finally sold its IP transit business to Arbinet-thexchange for $4 million in cash (see Arbinet Buys Band-X Biz). Arbinet, currently preparing for an IPO, will inherit contracts with 196 customers and nine IP capacity suppliers linked to Band-X's systems in New York, London, and Edinburgh and add them to its "data on thexchange" business launched in July.

But while Band-X and Arbinet are upbeat about the transaction, the deal has left the head of another service provider in need of anger management classes. Pan-European carrier Interoute Telecommunications Ltd. says it came close to acquiring the Band-X IP business earlier this month, reportedly for a price higher than $4 million, but was spurned at the last minute.

It's fair to say that Interoute executive chairman James Kinsella is far from happy.

"Band-X is a crappy little company, and you can quote me on that," he told Light Reading. [Ed. note: Thank you, Sir. We have taken you up on your kind offer.]

"I'm happy that deal didn't happen," Kinsella added. "All we wanted was their technology. We'll develop it ourselves now."

Band-X chairman Richard Elliot says he can't talk about any interaction with Interoute, saying only that what is left of his company is now focusing on the wholesale and managed voice market. "We're focused now on providing managed interconnect and outsourced switching services. Basically, we're distributing traffic to, and absorbing traffic from, the BT network to facilitate call termination for TDM and VOIP traffic."

He says the IP unit accounted for about 5 percent of Band-X revenues, and that the disposal, which sees seven staff transfer to Arbinet, leaves the company with 55 staff, debt free, and with a strong balance sheet.

At current rates, Arbinet now has an IP transit business with revenues of between $3 million and $4 million. In a filing with the Securities and Exchange Commission (SEC), Arbinet notes: "In July 2004, the members of our exchange for Internet capacity, together with the customers of Band-X, purchased $270,000 and 2,059 megabytes of Internet capacity."

Arbinet, which broke even on revenues of $38 million in 2003, has not yet revealed details of its planned IPO, which would see it list on the Nasdaq with the ticker symbol ARBX.

In the late 1990s and 2000, bandwidth exchanges were all the rage, with companies such as Enron, Ratexchange, and the Asia Capacity Exchange, as well as Band-X entering the market. Now Arbinet is the sole specialized provider, though it seems Interoute may have some interest in entering at least the crappy European market.

— Ray Le Maistre, International News Editor, Light Reading