iiNet Has Telstra In Their Sights After Aquisition

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ASX-listed telco and ISP iiNet is set to take a significant chunk of the broadband market following the formal announcement of its acquisition of TransACT.

As widely tipped by the media , iiNet has confirmed the acquisition of Canberra-based service for $60 million. TransACT has operations in the ACT, Queanbeyan, and regional Victoria, with 40,000 customers across the residential, SME, corporate and government market segments and a signficiant fibre network.

Independent telecoms commentator Paul Budde speculates that a yet-to-be-revealed deal has been struck between  iiNet, utility ActewAGL (TransACT’s second biggest shareholder) and NBN Co, ultimately sweetening the pie for iiNet – and Canberra.

IiNet’s CEO, Michael Malone, said acquisition of TransACT was part of the company’s strategy of building scale through consolidation.

The acquisition “represents an attractive strategic opportunity to build scale in the ACT market quickly and efficiently,” Malone said. “In particular, TransACT’s experienced and passionate management team will allow iiNet to grow its presence in the SME, corporate and government market segments, a key growth area for the company,” he added.

“We are also excited about the strong existing relationship between TransACT and ActewAGL, the leading utility provider in the region, and the resulting growth opportunities for both companies.”

The acquisition will bring 40,000 highly bundled subscribers across residential, SME, corporate and government market segments.

IiNet said it would also provide a growing SME, corporate and government customer base with complementary datacentre operation in ACT, generating nearly $30 million of annual recurring revenues.

The deal adds a 4500km network, passing more than 250,000 premises, an experienced management team with deep commercial relationships in key sectors and strong financials providing recurring annual revenue of approximately $80 million and EBITDA of $17 million.

 Independent telecoms analyst Paul Budde told CDN that the move fits with iiNet’s growth strategy in a market where “size does matter” particularly when faced with the NBN. “They know that once the NBN is in place, size relly does matter,” Budde told CDN. “They are putting themselves in a great position to compete with Telstra, Optus, TPG and others. TransACT would never be able to reach a size that would allow it to operate in that same league, so for them it makes sense to move out of this market.”

Budde said the transaction is most likely a result of a deal between incumbents and the NBN Co.

“I conclude from this transaction that some sort of deal has been reached between iiNet, TransACT, ActewAGL and NBN Co,” Budde said. “It is inconceivable that iiNet would have made this move without a full understanding of how the relationship with NBN Co would evolve.

“So most likely NBN Co will work on this with ActewAGL. This would be good news for Canberra as that would secure infrastructure work going forward for local companies.

“Also positive for Canberra is that they will secure a first-class broadband network moving forward – investments will be secured by NBN Co. This also means that the basic infrastructure will be open – this means that more RSPs and content providers will be able to compete over that infrastructure, giving customers more choice and better prices.” – Kate Castellari

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