Days of sweating about the competition appear over for a Calgary technology firm that has merged into the world’s largest exercise entertainment company.

E-Zone Networks, a company that chief technology officer Todd Simpson and a couple of friends founded out of their homes five years ago, has joined forces with main rivals Netpulse Communications of San Francisco and Xystos Media Networks of Quebec City.

The new private company is known as Netpulse E-Zone Media Networks. It will maintain operations in all three cities and have sales offices in major North American markets.

E-Zone’s estimated 300 shareholders will finalize voting today when they meet to discuss the merger. (Most ballots were submitted by proxy.)

“We’re very confident that the shareholders will approve it,” said Andy Wiswell, 49, of Calgary, the new company’s chief executive officer and former senior vice-president of E-Zone. “I think it’s going to be an outstanding combination of the three companies.”

Although it’s effectively a merger, on paper Netpulse is buying E-Zone and Xystos. However, E-Zone shareholders will control the majority of the 35 million shares. “E-Zone shareholders will end up owning slightly more than 50 per cent of the company,” said Wiswell, a former chief financial officer of Gulf Canada and a former president of ICG Propane. “Everyone will end up with Netpulse shares.”

Netpulse E-Zone operates an entertainment network designed to make gruntwork more fun. The network allows people to watch TV, listen to radio, surf the Internet, and follow personal exercise programs as they huff and puff on stationary bikes, treadmills and other exercise machines in fitness centres.

“The most difficult piece of the vision has always been to install the network,” said Simpson, 35, who designed E-Zone’s technology. “We now have a critical mass installed and the steam to go forward. We can now concentrate on building the network instead of competing head-on with others. We are already, one week after announcement, seeing the positive benefits of the deal. Large players in financing, media and technology no longer have to decide which of us to work with. We are the clear leader at this time. The opportunity is now there for the taking.”

Netpulse E-Zone expects to generate the bulk of its revenue from the sale of advertising shown on the exercise machine screens and TVs that hang in fitness clubs, and aired on an internal radio system.

The company is targeting fitness clubs in the 10 largest media markets in the United States and, pending approval of the merger, will soon begin expansion to Europe and Asia.

Netpulse E-Zone designs and markets media terminals — picture a laptop computer screen with buttons — that must be installed on each piece of exercise equipment.

In the future, it hopes to develop partnerships with exercise machine manufacturers, allowing Netpulse E-Zone equipment to be assembled in an exercise machine factory.

Wiswell said Netpulse E-Zone will earn approximately $4 million US in revenues in 2000, but, depending on how quickly and extensively the network is deployed, revenue is projected to jump to $30 million US in 2001.

Simpson said Netpulse E-Zone anticipates revenue of $100-$300 million in 2002. The new company hopes to raise $50-$75 million in capital within six months.

“Obviously, none of the three companies on its own had enough critical mass,” said Wiswell. “The merger makes it easier to generate capital.”

For Simpson, who grew up on a small farm near Cochrane and was among the first students to obtain a doctorate in software engineering from the University of Calgary, the deal fulfils his dream of providing high-quality, entertaining and healthy workouts to as many fitness enthusiasts as possible.

“When we looked at the health club industry, we saw this need for personalized entertainment,” said Simpson. “The only systems that were currently out there were the TVs that hung at the front of the health club, where you get to watch what everybody else is watching. You don’t have a lot of choice. So we figured there was a good market potential getting people personal choice.”

As people work out and interact with the network for half an hour, said Simpson, they become a captive audience, and a lucrative market, for e-commerce transactions, sponsorships, subscriptions, data-commerce, peer-to-peer services and other revenue streams — “a marketer’s dream.”

Presuming the merger is approved, Netpulse E-Zone will reach 11 million users. (By comparison, Time Warner’s cable system currently reaches 11.3 million subscribers.)

The new company will have more than 14,000 media terminals installed in 700 health and fitness facilities, and it has contracts to install another 20,000.

The merger has cost some people in Calgary, San Francisco, and Quebec City their jobs. According to Wiswell and a report in the Wall Street Journal, the merger reduced the total number of positions from 350 to 250. Simpson said E-Zone trimmed fewer than 20 employees while Netpulse cut 40 and Xystos let go fewer than 10.

Wiswell said the merger reduced total operating costs by one-third.