iiNet confirms TransACT acquisition


news iiNet this morning confirmed it had bought Canberra-based telco TransACT, in a deal which will cost the Perth-headquartered national broadband provider some $60 million and bring it a great deal of infrastructure in Canberra and Victoria, as well as 40,000 new customers.

The deal was reported last week by the Financial Review; an event which forced iiNet to halt trading of its shares on the Australian Stock Exchange. The company has now exited its trading halt.

TransACT is one of the few major independent broadband and telecommunications services providers left in Australia, after iiNet, TPG and Optus have embarked on buying sprees over the past decade which has resulted in a significant consolidation of the market. The company operates an independent fibre to the node network in the ACT, serving the Canberra residential and business markets, as well as infrastructure in areas such as in rural Victoria, where the company’s purchase of HFC operator Neighbourhood Cable gave it a foothold.

TransACT’s website states it has revenues of about $100 million a year, about 150,000 residential customer, over 5,000 small to medium business customers, and a state and federal government roster of some 50 agencies. It typically focuses on selling a so-called ‘triple-play’ bundle of services to customers, with voice, video entertainment and broadband in the mix. iiNet today said the company had total recurring annual revenues of about $80 million and earnings before interest, depreciation, taxation and amortisation of about $80 million.

In a statement released today, iiNet chief executive Michael Malone said the acquisition was consistent with iiNet’s strategy of building scale through acquisitions and cemented the company’s position as the new number two provider of ADSL broadband — ahead of Optus and behind Telstra.

“iiNet’s acquisition of TransACT represents an attractive strategic opportunity to build scale in the ACT market quickly and efficiently,” said Malone. “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.”

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

For its own part, TransACT was also positive on the deal, with the company’s chief executive, Ivan Slavich, stating that he and his management team were excited about the growth possibilities presented. “It will be great for TransACT, and our partner ACTewAGL, to have access to a leading national brand,” he said in iiNet’s statement. “iiNet’s reputation for excellent customer service and product innovation will be well-received by our loyal residential, SME, corporate and government customer base,” he said.

The acquisition will be funded through cash and debt, iiNet’s statement said, and is expected to be completed by the end of this month. TransACT’s management team is to remain with the company.

I’ve provided a pretty comprehensive opinion piece on this acquisition already; broadly, it argues that iiNet’s continued consolidation of Australia’s ISP space will be detrimental to competition in an NBN world. I don’t have a lot of thoughts to add this morning just yet.

Image credit: iiNet