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Same as it ever was at TNS

Former executives of Transaction Network Services couldn't pass up the chance to take control of their former company, which was part of a group of assets sold off by PSINet, the cash-strapped ISP that filed for bankruptcy on June 1.

January 3, 2002

The way Brian Bates tells it, he and the other principals of Transaction Network Services sold their business to PSINet in 1999 when PSINet made them an offer they couldn't refuse.

Originally founded as a provider of network services for credit card processing companies in 1990, TNS had completed an IPO in 1994 and expanded into other areas, including ATM and POS services, before selling its business to PSINet for $720 million.

After the sale to PSINet, most of the TNS management team went to work for PaylinX, a payments technology company.

Soon after the acquisition was completed, however, PSINet suffered a reversal in fortune that resulted in the need to divest some of its assets. (Despite the sale of assets, the company filed Chapter 11 on June 1.) One of the assets on the block was its Transaction Solutions subsidiary, the business it had acquired from TNS.

At that point, Bates and the others got another offer they couldn't refuse, this time from private equity firm GTCR Golder Rauner LLC.

Founded in 1980, GTCR currently manages more than $4 billion of equity capital invested in a wide variety of companies and industries. One area of focus for the firm is transaction processing. GTCR earlier this year backed Genpass, led by former MAC executive Bipin Shah, in its acquisition of the Moneymaker and Money Belt networks.

GTCR agreed to fund the purchase of their old company, at a cost of $285 million – a relative bargain in light of the price paid by PSINet. The former TNS executives were seeking just such an opportunity, as PaylinX had recently been acquired by CyberSource. Bates said there was little, if any, hesitation.

"TNS was always fundamentally a strong company, and the fundamentals were still in place," he said. "We were comfortable that the core business was intact."

TNS works with 29 ATM processors, among other clients. "What they're good at is processing," Bates said. "They should be able to look to a network partner to bring them the technology -- preferably through the same pipe they already have -- and make it look like any other transaction."

TNS connects them to its X.25 backbone network via a variety of telecommunications, often through partnerships with carriers such as Bell Atlantic and BellSouth, which offer CDPD and Mobitex wireless services, respectively.

"We don't want to be a technology driver," Bates said, "but as technology develops and ATM owners want to use it, we want to be in a position to offer it."

The "new" TNS will offer all of the same products and services as its predecessor, said Bates, the company's president and chief operating officer.

That includes the TransXpress 4000 series of modems that won favor with ATM operators by providing a relatively simple way to convert leased-line machines to more economical dial-up telecommunications with no software modifications required at the ATM or host.

Based on the popularity of the first modem marketed as the TransXpress 1000, TNS expanded the product line to support higher speeds and other access methods. Now known as the TransXpress 4000 series, the line includes the TransXpress 4001, which supports dial access; the TX 4002, which supports ISDN access; and the TX 4003 for CDPD or Mobitex wireless access.

"A lot of ATMs that could justify having a leased line five years ago can't do so today," Bates said, noting that deployers are trying to cut their fixed costs as the average number of transactions per machine continues to decline. Telecommunications, traditionally one of the biggest expenses in an ATM program, is an obvious area for cost cutting, he said.

Bates expects the TNS modems to become increasingly popular in other countries as business cases for off-site ATMs develop. "As countries where we're active move to off-premise deployment, we're going to be right there," he said.

Reston, Va.-based TNS has offices in Canada, the UK, Ireland, Sweden, France, Germany, Spain and Australia.

Bates said the ATM market changed dramatically after the entry of independent deployers in 1996 and continues to change today. "As the dynamics change, the technology changes."

TNS wants to change with it and be able to serve all ATM operators, Bates said, including the few who are experimenting with high-tech features such as full-motion video advertising and Web-enabled services.

Acknowledging the need for broadband technology, he said, "We're aggressively pursuing a dedicated IP-based network offering to push greater amounts of data in a cost-effective manner."