In a boost to Bermuda's efforts to become a centre for electronic commerce, Cable & Wireless Plc and TeleBermuda International Ltd. are competing to make the Island an offshore hub for Internet transactions.

At stake are potentially billions of dollars of merchant transactions, which the two companies hope to attract to tax-free Bermuda using their telecommunications facilities and local banks.

Cable & Wireless Plc is putting in place a $1 million computer server system which will host Internet merchant sites and process billing and payment transactions using the Bank of Bermuda.

Cable & Wireless' electronic commerce hub in Bermuda will be one of several being set up around the world. Other hubs have been set up in London, England and North America. The telecommunications company is also planning facilities in Australia, Hong Kong, Japan, and Europe. Bermuda will be the offshore hub for Cable & Wireless Internet offerings to merchants.

Meanwhile, TeleBermuda parent GlobeNet Communications Group Ltd. has teamed up with Canadian-based Valu-net Corp. to offer the same facilities in Bermuda.

Valu-net will be setting up an Internet server at TeleBermuda's facilities at St. David's.

The transactions will be processed worldwide through an agreement with Citibank and then transacted to an as yet unnamed Bermuda bank.

Valu-net currently offers similar services to merchants in Canada. The company wants to use Bermuda to expand internationally using TeleBermuda's network facilities, company president and chief executive officer David Lucatch said.

"Our companies intend to give merchants the best of both worlds -- secure electronic commerce expertise, coupled with the most technologically advanced network infrastructure available,'' Mr. Lucatch said.

In the initial stages Valu-net intends to host 500 merchant stores online from Bermuda with projections to reach 5,000 at the end of the first year. Testing of the system is expected to begin in 90 days with full service in four months.

Valu-net spokesman Brad Friesen said the company planned on investing $100,000 to $200,000 in the computer system in Bermuda. Valu-net trades on the Alberta Stock Exchange.

Cable & Wireless' computer system is being tested in Houston, Texas. Cable & Wireless plans on having the facility set up and going in Bermuda by April. A team of six people will be in Bermuda developing the facility.

"We are going to generate a lot of revenues to our customers,'' Cable & Wireless head of products and services Mallik Penamatsa said, adding that by using Bermuda for the transaction Internet merchants would be able to bypass taxes of up to 35 percent.

The company also plans on offering Internet services locally as part of its plans, a move that could bring the company into conflict with other service providers and Government over telecommunication licences.

Cable & Wireless Bermuda general manager Eddie Saints said the company was going after providing services to Fortune 500 companies. Cable & Wireless is in negotiations with giant foreign exchange trader EBS Ltd. (see sidebar) to provide an offshore service for its worldwide transactions.

"This is the first of our Internet strategies,'' he said. "There are other plans underway.'' The plans include providing a local Internet service in Bermuda and cheaper voice service using Internet technology. The move to provide Internet service will bring the company into loggerheads with local providers Logic Communications, owned by the Bermuda Telephone Co. Ltd., and North Rock Communications.

In the past, Government licensing arrangements have restricted international carriers from offering Internet services locally but Cable and Wireless argues the legislation is ambiguous on the subject.

"It's a point of debate, one we have to work out,'' Mr. Saints said.

Companies reveal e-commerce plans Telecommunications Minister Renee Webb was not available for comment. The company also plans on offering voice over the Internet. Internet technology allows companies to package international voice communications more efficiently and could lower the costs of making a long distance call dramatically.

"We don't see this as any different from providing long distance service,'' Mr. Saints said. "We are licensed in Bermuda to provide long distance service and we will use whatever technology is available to get the products down the road.'' Last year Cable & Wireless prevented Logic from offering such a service in the local market, arguing Logic was breaking its licence as an Internet service provider by offering an international voice service in competition with C&W.