Asia Online mulls financing options as market plunges

At the age of 50, the soft-spoken Randolph is, if not exactly mellow, then certainly a far cry from the adrenaline-driven 20-to-30-somethings powering the internet revolution. Yet Randolph and his growing team of some 400 employees worldwide, is quietly building what he hopes will be one of Asia's most powerful and extensive internet solutions companies.

Founded in February last year, Asia Online's goal is to provide consumers and businesses with a one-stop supermarket for communicating and doing business on the web. The company's services include internet access, consultancy services, web-hosting and the sale of other companies' products. It is targeting companies with fewer than 50 employees who don't have their own information technology staff but need to be involved on the internet. As a business model, it's becoming popular with investors.

"It allows the website to be an agent, where you collect a fee for a service, rather than a principal, where you own something yourself," says Gabriel Li, a partner at venture capital company Orchid Asia Hong Kong. "It's the model we like best."

Private equity

Unlike many of his competitors, who have rushed to the public markets for funding only to see, in many cases, their stock price plunge below the issue price, Randolph has so far funded his growth and acquisitions with private equity. He bought the company, originally called Asia Communications Global, after examining it as an independent consultant. His brief was to re-capitalize it and get as much money as possible for the original investors, which consisted of two institutions and several Chinese businessmen.

Instead, he was so taken with the company that he decided to keep it going. Of the original investors, only Japan's Softbank was willing to sustain its investment, and the venture capital company remains Asia Online's largest investor.

Randolph is in no desperate need for funds right now. Recently a new group of investors, including Paribas, ABN Amro, Dell Computer, CIBC, Hikari Tsushin and PaineWebber, coughed up US$100 million to help foster growth. Randolph says he has 17 potential acquisitions in the pipeline and is aggressively building the company's internal infrastructure and staff.

No competition

Still, Asia Online is up against some stiff competition in the region. iAsiaWorks, a privately held, US-based internet solutions company whose Asian headquarters are in Hong Kong, considers itself so far ahead of Asia Online as to not even consider it competition.

That doesn't bother Randolph, who doesn't intent to remain small long. He's considering various expansion and fund-raising options. But one thing he's not sure of is if he wants to continue funding growth through private investment.

"Private equity means I have to give up more of the company at a price lower than I would like," he says.

He could go to the debt markets, and retain more ownership. But debt is expensive and the conditions imposed on the debtor can be onerous.

He could merge with a bigger company that has greater access to capital than he has. That too has its appeal, he says. But a merger can take a long time to organize. Private equity can be raised quickly.

Finally, there is the IPO option. But what chief executive in his right mind, given a choice, would go public just as investors are fleeing the sector in droves?

Randolph turns up the jazz.

á

ááááá á