SkyNetGlobal deal wheels wobble

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A $29 million Russia-Ukraine deal for Sydney wireless and broadband provider SkyNetGlobal seems tipped to collapse while the firm flags plans to acquire a Malaysian e-payments and prepaid mobile services business for some $42.5 million.

SkyNetGlobal has released a statement to the ASX suggesting a $29 million home automation products deal with Russia-Ukraine company Techno Import may fall through.

"[SkyNetGlobal] has not received confirmation from Techno Import on whether it will be able to fulfil its obligations on the supply agreements for $29 million in home automation products," the company said in the statement.

SkyNetGlobal initially announced the Techno Import deal 21 March. "An Australian subsidiary of a Russia-Ukraine trading company, [Techno Import] was earlier granted a 60-day extension to make payment," the company said.

The extension officially expired 30 August. However, SkyNetGlobal has maintained it would not incur any financial loss on the deal as it had not delivered any products or made any commitment to do so.

The company was reviewing its legal options, it said.

Meanwhile, Jonathan Soon, chief executive at SkyNetGlobal, said a proposed Malaysian purchase gave the firm a chance to enter another "rapidly growing" market. SkyNetGlobal was buying Malaysian firm E-pay, which had a "strong track record" of profitability, he said.

"We see this acquisition as a major step in the development of the company and the board believes it offers significant value for shareholders," Soon said in a statement.

E-pay reportedly earned revenue of $220 million for the financial year ending 31 March. However, net profit after tax for the Malaysian firm was only $2 million, SkyNetGlobal said.

"E-pay [is] expected to deliver a net profit of $5 million for the 2006 calendar year," the company added.

The controlling stake in Kuala Lumpur-headquartered E-pay was held by Simon Loh, who also owned a "substantial interest" in SkyNetGlobal, the company said.

SkyNetGlobal has entered into a conditional agreement to acquire a controlling stake in E-pay, which operates in Malaysia, Indonesia, Pakistan, Thailand, Philippines, Vietnam, Cambodia and Brunei.

The Malaysian firm would convert its reporting period to a financial year ending 31 December when the acquisition was completed, SkyNetGlobal said.

The Sydney company would acquire a firm called Orion Gateway that owned 60 percent of E-pay for $28 million initially -- $20 million in shares and $8 million in cash. "Further consideration of up to $14.5 million is payable upon certain profit-related milestones for 2006," SkyNetGlobal said.

The E-pay deal was partly conditional upon SkyNetGlobal raising $20 million to fund part of the acquisition and to expand the business.

"Given the scale of the opportunity afforded by E-pay, the company will consider its options in relation to its existing W Home business," SkyNetGlobal added.

W Home is SkyNetGlobal's home automation products arm.
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