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  • Featured, News, Telecommunications - Written by on Friday, January 13, 2012 13:44 - 34 Comments

    TPG may buy iiNet, Telstra tells staff

    update: Since this article was published, Telstra has clarified that the comments published below were originally published by the Financial Review and distributed to staff as a daily email summary of media commentary. It appears that a Telstra staff member removed the AFR attribution and published the statement on Telstra’s internal intranet; it appeared to staff that it was a statement from Telstra itself.

    news Telstra has issued a newsletter to its retail staff informing them that iiNet’s buyout of Internode could see TPG vaulted into clear third place in Australia’s broadband market, following a possible buyout of iiNet by TPG.

    Over the closing months of last year, TPG bought about 7.24 percent of iiNet, in a move which many in Australia’s telecommunications sector could be the first step to an eventual acquisition bid. At the time, TPG said it had “no specific intention regarding iiNet” other than to own the shares as “a strategic investment”.

    Speculation about the future of the industry as a competitive sector intensified when iiNet unexpectedly announced just before Christmas last year that it would buy long-term rival Internode, with Internode founder Simon Hackett to end up owning a similar percentage of iiNet as TPG when the transaction completes early this year.

    However, in an update to staff issued yesterday under the ‘industry news’ banner and seen by Delimiter, Telstra appeared to state that it believed a TPG acquisition of iiNet was likely. “iiNet’s $105 million acquisition of Internode, announced just prior to Christmas, will see it gain 190,000 subscribers, and spearhead TPG Telecom into third place among broadband providers behind Telstra and Optus,” the company’s update read. “In recent months, TPG Telecom has been building a stake in iiNet, which, according to market speculation, could be a precursor to a full takeover.”

    It’s possible that the mention in Telstra’s newsletter of TPG Telecom leaping into third place could be a typo — with the iiNet acquisition of Internode actually more likely to leap iiNet into third place in the broadband sector. A TPG acquisition of iiNet would likely lead TPG to being the second-largest player in Australia’s broadband sector, ahead of SingTel Optus.

    If an acquisition of iiNet by TPG did occur, it would see Australia’s telecommunications sector drastically consolidated in the arena of fixed-line broadband into just three major players — current incumbents Telstra and Optus as well as TPG. Other rivals such as Primus and Dodo currently have a reduced market share compared with the existing top four players.

    Any move by TPG on iiNet would likely be viewed by iiNet’s board as a hostile takeover attempt. The two ISPs have radically different corporate cultures and market approaches, with iiNet being viewed as a very open and friendly company which tends to target mid-level broadband consumers with premium customer service and a quality broadband network, and TPG having a more cut-throat internal corporate culture and a market focus which sees it positioned as one of Australia’s discount kings of broadband.

    The chief executive of iiNet, Michael Malone, has said a public inquiry would need to be held if TPG decided to extend its stake in his company to the point where an acquisition was on the cards — and the issue could become a policy question to be decided by the Federal Government.

    If TPG were to make an offer for iiNet, Malone said, such a deal would be on the threshold where the Australian Competition and Consumer Commission would be interested in examining impacts on competition arising from the deal.

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    34 Comments

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    1. Posted 13/01/2012 at 1:55 pm | Permalink |

      iiNet buying Internode – (and I know I’ll be unpopular in saying this) – wasn’t such a bad thing. They play in a similar market niche, but are different enough to make them complementary to each other, bolstering what each can offer.

      TPG taking all that over? That wouldn’t be so good.

      TPG play in a completely different niche – (focussing on more budget conscious consumers) – and they *COULD* dumb down iiNet/Internode plans closer to their less expensive options.

      They might also operate them as “premium brands”.

      Though TPG buying iiNet has been ‘rumoured’ for a while, it becomes a lot harder given the iiNet/Internode merger, and it should be noted that Simon Hackett will have a very similar share of iiBorg to that of TPG.

      Could come down to a voting stock battle if TPG tries.

      Interesting times ahead, possibly.

    2. Level380
      Posted 13/01/2012 at 2:28 pm | Permalink |

      If TPG buy iiNet then I’ll be leaving iiNet as a customer. I refuse to have a service from TPG ever!

      • evilsync
        Posted 14/01/2012 at 12:28 pm | Permalink |

        Funny, I thought the same with iinet buying internode. Now I’m cutting the chase and signing up with TPG.

        • Lindsay
          Posted 16/01/2012 at 7:14 pm | Permalink |

          That’s a very strange thing to do.

    3. Clinton
      Posted 13/01/2012 at 2:32 pm | Permalink |

      i think if TPG were to buy iinet they would run it as a premium brand or they risk losing a large chunk of the customer base that they would have just acquired.

    4. Brendan
      Posted 13/01/2012 at 3:37 pm | Permalink |

      I wouldn’t put it past TPG to dispatch a competitor through acquisition. However, that has a pretty big impact on market choice for the consumer.

      Never mind that they operate on fundamentally different business principles.

      Still, 7.5% in shares is a long way from a buy-out. Telstra may just be sowing seeds of doubt.

    5. Posted 13/01/2012 at 4:26 pm | Permalink |

      If TPG put a takeover bid in and it was approved by all parties involved, I’d leave iiNet and go back to Telstra.
      Sounds crazy right?

      • Level380
        Posted 13/01/2012 at 4:36 pm | Permalink |

        not crazy at all…. Telstra is offering some really nice plans atm and if you can get cable which is 30mb (or upto 100mb in melbourne) then why hang around on an old adsl2 line getting 3-12mb a sec!

        • Charlie
          Posted 16/01/2012 at 12:57 pm | Permalink |

          Actually, it’s 100mbit cable in more than Melbourne now. Brisbane has it and I believe Sydney does too. Not sure about other states.

    6. Posted 13/01/2012 at 4:36 pm | Permalink |

      — iiNet’s $105 million acquisition of Internode, announced just prior to Christmas, will see it gain 190,000 subscribers —

      that’s interesting. i thought Internode had 250K subscribers. looks like they lost a quarter of their subscribers following the uproar over the most recent plan changes. no wonder Hackett so quickly sacked the engineers and sold the business by Christmas. desperate exit.

    7. Simonh
      Posted 13/01/2012 at 5:01 pm | Permalink |

      Sweet, I have a few iinet shares I am looking to sell.

    8. Log
      Posted 13/01/2012 at 5:18 pm | Permalink |

      Sod off TPG….

    9. Jason
      Posted 13/01/2012 at 5:23 pm | Permalink |

      GO TPG GO TPG GO TPG GO TPG!!!!
      YAY!!!

      This is some great karma for iiNet/Internode.

      • Log
        Posted 13/01/2012 at 5:29 pm | Permalink |

        What they do to you Jason go up to you and broke your legs or something.

        Get off my net fool.

    10. Log
      Posted 13/01/2012 at 5:32 pm | Permalink |

      TPG has to be the biggest pile of junk ISP that I have ever to use be as it may be fine for others to me its junk riddled with oil leaks and rust drop outs and slow downs

      • Troden
        Posted 16/01/2012 at 5:14 pm | Permalink |

        What Log said!! ^^^^^

    11. philh
      Posted 13/01/2012 at 8:35 pm | Permalink |

      oooh, Telstra rubbing the crystal ball again. Yes, TPG could buy iiNet. So could Warren Buffett. iiNet are listed on ASX . Or iiNet could buy TPG. Warren Buffett wouldn’t, because he’s a smart investor… but if the shares are traded in enough volume, anybody with the funds can buy a controlling stake in whatever firm they can.

      What a non-story. Sounds more like Telstra spreading rumours to lessen market confidence in their competitors.

      • alain
        Posted 15/01/2012 at 6:56 pm | Permalink |

        Telstra is not the first to state speculation in that area, it’s been going since TPG first bought into iiNet way back.

        Most of the publicity has been by iiNet itself back in November as Renai has pointed out.

        http://delimiter.com.au/2011/11/21/tpg-buyout-to-require-public-enquiry-says-iinet/

      • nathan
        Posted 17/01/2012 at 12:00 pm | Permalink |

        I know it’s not exactly your point but warren buffet has never purchased technology stocks before so i somehow doubt he’s a likely bidder. He doesn’t buy into industries he doesn’t understand and considering he still doesn’t have computers in his head office i doubt he has a huge understanding of internet companies.

    12. David Robinson
      Posted 13/01/2012 at 10:06 pm | Permalink |

      So could Warren Buffett. ha ha good one.

    13. dave p
      Posted 14/01/2012 at 10:12 am | Permalink |

      What makes you think it’s a “white elephant”? I am failing to see how a network which will provide a solid service to 100% and a massive upgrade to 93% (with even higher speed upgrades right around the corner) is not useful.

      • SMEMatt
        Posted 14/01/2012 at 11:26 am | Permalink |

        Your letting your political bias show again. Did you get that post straight from a CLP handout?

        • Never Again!
          Posted 14/01/2012 at 1:05 pm | Permalink |

          you mean the Crap Labor Policy handouts? Normally available from the Prime Ministers office.

          • SMEMatt
            Posted 16/01/2012 at 1:48 pm | Permalink |

            It seems the post I was replying to has been deleted and righting so. Having been to a couple of Tony Abbots Function it was almost a direct quote of something Tony would say.

    14. Adam Nelson
      Posted 14/01/2012 at 2:12 pm | Permalink |

      If TPG bought IINET. The next day Node could just walk away and continue being a solo company

      Honestly there nothing stopping IINET/Node ganging up against buying TPG

    15. BooM
      Posted 14/01/2012 at 8:41 pm | Permalink |

      TPG isnt as bad as everyone makes it out to be. Excellent value plans and (in my experience) decent speeds and connection. Customer service? Might not be up to par with iiNet or others but I’ve rarely had a problem with my connection so haven’t had to contact them often. When they first appeared, yes, they did have horrible connections dropouts but I cant remember the last time I’ve had to power cycle or reset my modem

      In any case, I dont want TPG to buy iiNet

    16. hohum
      Posted 15/01/2012 at 4:48 am | Permalink |

      the more choice the better, the more competition the better. Let’s hope that the industry can’t achieve bank status and start gouging.

    17. Jim
      Posted 15/01/2012 at 5:49 pm | Permalink |

      Cant wait to see TPG take over iiNet.
      I as a TPG customer welcome our new iiNet slaves.

    18. Posted 16/01/2012 at 8:08 am | Permalink |

      Tell him he’s dreaming!

    19. davidr
      Posted 16/01/2012 at 3:39 pm | Permalink |

      Hmm I remember reading public statement /signaling/ under this line “telstra & optus won’t undercut us” which is decidedly -un- competitive in itself; go my dear tpg shut down these big mouths always jostling to raise artificially priced wire line

    20. Posted 17/01/2012 at 12:20 pm | Permalink |

      hi everyone, I have just posted the following update on the article:

      update: Since this article was published, Telstra has clarified that the comments published below published were originally published by the Financial Review and distributed to staff as a daily email summary of media commentary. It appears that a Telstra staff member removed the AFR attribution and published the statement on Telstra’s internal intranet and removed the attribution; it appeared to be a statement from Telstra itself.

      Cheers,

      Renai




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