-PSINet: PSINet acquires Internet companies in Hong Kong, Germany, France and United States

M2 PRESSWIRE-8 July 1998-PSINet: PSINet acquires Internet companies in Hong Kong, Germany, France and United States (C)1994-98 M2 COMMUNICATIONS LTD

RDATE:080798

PSINet Inc. announced today that it completed the purchase of four Internet companies, in Hong Kong, Germany, France and the United States, for approximately $46.0 million in cash. These four companies generate annual revenue of over $23.0 million and represent another major step in executing PSINet's strategy to expand its presence in the top 20 telecommunications markets worldwide.

These acquisitions further strengthen PSINet's leadership position as the largest independent global facilities-based Internet communications provider. "Having completed a $600 million financing earlier this year, our primary objective has been effective use of these funds for key acquisitions and bandwidth purchases, which will help move our business toward profitability," said William L. Schrader, PSINet chairman, chief executive officer, and president. "Our acquisition team stepped up activity following the financing and continues to search actively for the best Internet partners worldwide using a disciplined approach."

"We are pleased to team with Internet pioneers at LinkAge in Hong Kong, INX in Germany, SCII-CalvaPro in France and ioNET in Oklahoma, USA," Schrader continued. "Combined with our acquisitions earlier this year of iSTAR Internet Inc. in Canada, Internet Iprolink SA in Switzerland, STI-CalvaCom in France and Interactive Telephony Limited (ITL) in the UK, PSINet has acquired over $50 million in annual revenues."

"These acquisitions accelerate our entry into key world markets, build revenue and customer traffic on our network, and contribute to earnings before interest, taxes, depreciation and amortisation (EBITDA)," said Edward D. Postal, PSINet senior vice president and chief financial officer. "With these acquisitions, PSINet is on track to meet our target of 100 percent revenue growth for 1998 through a mix of organic growth and acquisitions."

Acquisition highlights from these four Internet companies:

* Over $23 million in acquired annualised revenue.

* Over 3,500 new business customers.

* Over 20,000 new 'small office home office' and dial up customers.

* Revenue mix: 70 percent Internet access and 30 percent value added services.

* EBITDA neutral for the last reported quarter.

* Strong Hong Kong presence - world's 19th largest telecom market.

* Expanded German presence - world's 3rd largest telecom market.

* Added traffic on PSINet's 10,000 mile US fibre network.

PSINet and its mature subsidiaries have earned market share leadership, based on the number of commercial Internet customers: US (No. 2 position of approximately 4,000 US ISPs), Canada (No. 1 of 400), UK (No. 3 of 300), Japan (No. 7 of 300), Hong Kong (No. 1 of 120 licensed), Switzerland (No. 3 of 130), and Germany (No. 5 of 300).

One of the key factors contributing to this global success is PSINet's ability to integrate quickly newly acquired companies. "Our focus is to meld acquired teams with existing staff to combine networks, products, accounting systems, customer care and other operations with those of PSINet," said Pete Wills, PSINet executive vice president and chief operating officer. "In fact, due to the successful implementation of this integration strategy, PSINet Canada/iSTAR is on track to become EBITDA positive in just four quarters. These recent acquisitions are currently being integrated into PSINet to take mutual advantage of economies-of-scale, global coverage, and the tremendous global marketing power that PSINet enjoys."

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LinkAge Online Limited - Hong Kong LinkAge, founded in 1994 by chief executive officer Chin Man, is recognised as one of Hong Kong's first commercial Internet service providers and a leading supplier of total Internet solutions to businesses, professionals, government agencies and other ISPs. LinkAge is the only Hong Kong ISP to operate a trans Pacific DS-3 ATM Internet backbone between Hong Kong and the United States. Hong Kong is the fifth largest telecommunications market in Asia, and Linkage is the largest provider of corporate dedicated Internet connections with approximately 35 percent market share. It also provides integrated business Internet solutions, including Web hosting, managed co-location, intranet and extranet, to companies throughout South East Asia. LinkAge has earned ISO 9002 certification, an international quality management system standard. Chin Man will continue to lead LinkAge Online as a PSINet subsidiary.

Interactive Networx GmbH - Germany Interactive Networx (INX), headquartered in Germany's capital Berlin, is the largest ISP in the city and nationally recognised as a quality ISP. INX has five points of presence: Berlin, Hamburg, Frankfurt, Cologne and Hannover. It provides complete business Internet solutions, integrating corporate networks with Internet access, web hosting, integration services and access for individuals. Now combined with PSINet Germany GmbH, PSINet is one of the largest Internet providers in Germany, which is the fastest growing Internet market in Europe. Germany is also the largest telecommunications market in Europe, and the third largest in the world. This acquisition fits PSINet s German strategy of offering turnkey solutions for the corporate market over PSINet's local calling network with 100 percent coverage in Germany. Interactive Networx serves major clients including the Bank of Berlin, the Berlin Fair, major publishers like Gruner & Jahr and FAZ, major TV stations like ARD and SAT1, as well as Daimler-Chrysler and Siemens. The company will be integrated with PSINet Germany, with managing director Helmut Blank, and co-managing directors Robert Rothe and Joern Lubkoll continuing to develop the INX brand name for dial up services throughout Germany.

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SCII-CalvaPro - France SCII-CalvaPro, headquartered in Paris, is a full-service business-to-business telecommunications company that provides Internet applications and other communications services primarily to banks, shipping and forwarding agencies principally in the sub-Saharan African market. SCII-CalvaPro services its customers by providing low cost data communications as an alternative to the traditional high cost intercontinental data transmissions to and from Africa, using a network of agents, distributors and full time staff. SCII-CalvaPro's was profitable for the year ended June 30, 1998. Although African Internet development lags behind other global markets, PSINet's commercial customers elsewhere have been asking for a secure means of reaching many of their counterparts in Africa, and SCII-CalvaPro is an excellent solution. The company will be led by Francois Benveniste, managing director of PSINet France, and will be integrated with PSINet, but operated as an independent subsidiary serving Africa.

ioNET Internetworking Services - Oklahoma ioNET is a full service, value added provider of Internet and network systems integration services to businesses, universities and residential customers in the south central region of the US. ioNET's service offerings include Internet connectivity, web hosting and programming, and Internet consulting. In addition, ioNET has developed vertical market Internet services including comprehensive banking, medical and telecommunications Internet solutions. By combining the Internet with systems integration, ioNET has leveraged a variety of technologies in order to service the internetworking needs of its customers. The company will continue to be led by founder Phyllis Johnson and CEO Leonard Conn and operated as an independent subsidiary.

Near Term Financial Impact PSINet will announce second quarter earnings on July 21, 1998. These four acquisitions will have no appreciable revenue effect until the third quarter; however, there will be acquired research and development expenses to be written off in the second quarter. The company expects to complete the required valuation process prior to the July earnings release and anticipates the acquired R&D write-off will be up to $20 million.

PSINet Acquires Internet Companies in Hong Kong, Germany, France and United States/ page 5

NOTES TO EDITORS

About PSINet

PSINet is leading provider of turn-key corporate Internet and intranet access, managed security services, electronic commerce solutions and Web hosting services throughout the United States and abroad. PSINet manages one of the world's largest and most advanced fast-packet networks, which provides state-of-the-art, high speed Internet access ranging from dedicated high-speed modem dial-up. PSINet backs up its state-of-the-art network with the industry's original service guarantee, employing automatic back-up systems and crediting service for outages of as little as one percent of a business day.

Headquartered in Herndon, VA, PSINet has offices throughout the US and subsidiaries in Canada, Japan and Europe, including Belgium, Germany and the UK. The PSINet UK Web site is available at http://www.uk.psi.net.

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