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  • News, Telecommunications - Written by on Wednesday, October 24, 2012 10:06 - 22 Comments

    Telstra to buy Adam Internet

    news The nation’s largest telco Telstra has announced plans to firm up its already dominant position in Australia’s broadband market, through the acquisition of South Australian broadband provider Adam Internet.

    The planned deal was rumoured in the industry this week, and confirmed this morning in a joint statement issued by Telstra and Adam Internet. “Telstra has entered an agreement to acquire the Internet Service Provider, Adam Internet and will support the South Australian broadband business expand nationally,” the pair’s statement said. “The agreed acquisition, which is subject to ACCC approval, will see Telstra acquire all of Adam’s business including Adam’s Adelaide data centre and fibre assets.” Telstra said it would would retain the Adam brand and run the company as a stand-alone subsidiary of Telstra.

    Telstra’s Innovation Products and Marketing Group managing director, Kate McKenzie said the acquisition aligned with Telstra’s strategic priorities to retain and grow customers and build new growth businesses. “Adam is a respected brand with a loyal customer base in South Australia,” McKenzie said. “It’s a great online, low cost business that lets customers purchase and manage their own services. This model offers opportunities for growth, particularly for consumers wanting online sales and support.

    “Customers trust the Adam brand and we’ll certainly be keeping it as we work towards further growth under Adam’s first class management team. We are excited to be able to help this South Australian success story expand nationally,” she said.

    Adam’s executive chairman, Greg Hicks said Adam and Telstra’s shared customer service philosophy was “a pivotal reason” behind today’s announcement. “This agreement will help cement a strong future for the Adam brand, our people, and our customers and represent the next stage of Adam’s growth,” Hicks said.

    “The outcome of this transaction for Adam’s existing customers is simple – Adam will continue to provide excellent value for money broadband that doesn’t compromise on service. The message for potential new customers is that, with Telstra behind it, Adam will be expanding nationally. We’ve built a great business with a great team running it and we’ve got a bright future. Adam Internet customers can continue to contact us in the normal way,” Hicks said.

    Hicks will remain an important part of the Adam operation as a consultant following the completion of the sale. The pair of companies said that existing employment arrangements for current staff would not be impacted by completion
of the sale.

    News of the acquisition is likely to attract the interest of the Australian Competition and Consumer Commission, which will likely consider whether the deal would be to the detriment of competition in the broadband industry, given Telstra’s already dominant position in it. It is possible additionally that Telstra’s rivals would object to the buyout on the basis of competition grounds.

    According to figures released by iiNet recently as part of its annual financial results package, Telstra has about 2.6 million ADSL broadband customers; dominating the market compared with the next largest ADSL broadband company, iiNet. Optus and TPG were in third place with between 570,000 and 580,000 ADSL broadband customers each. Telstra and Optus additionally boast substantial counts of HFC cable broadband customers.

    The news comes as Australia’s broadband market continues to see sharp levels of consolidation, with companies such as Internode, AAPT’s consumer division, Netspace and TransACT having been snapped up recently by iiNet, and Optus picking up wireless telco vividwireless.

    opinion/analysis
    It’s been an open secret for a long time in Australia’s telecommunications market that the Hicks family — which has long controlled Adam Internet – has had the company up for sale. I think the family has just grown tired of managing the business which it founded back in 1986 and is looking to cash out, at a time when the industry is going through rapid change and continued consolidation is afoot.

    Given iiNet’s acquisition of Internode (also based in South Australia) and the fact that Adam Internet is believed to hold a substantial portion of South Australia’s broadband customers, it was never likely that iiNet was going to be able to buy out Adam Internet as well; this would have placed iiNet in a dominant position in South Australia. Plus, there’s also the fact that iiNet still has last year’s acquisitions to bed down and likely isn’t keen to take on more just yet.

    However, I am quite surprised that Telstra has put its hat in the ring to pick up Adam Internet. The telco must surely be aware that the ACCC will be looking very carefully at this acquisition to vet it for competition concerns. Most industry onlookers have ruled out new acquisitions by Telstra in Australia’s telco sector for years, because of the big T’s already dominant position. Telecommunications policy is supposed to enhance competition; not facilitate Telstra to crush it.

    In this sense, it is possible that Telstra views this acquisition as a test case. If the ACCC cracks down on this one with a vengeance, it will mean that Telstra will find it hard to expand further along similar lines in future. But if the ACCC allows it, it may mean that Telstra’s tacit ban on acquisitions may not be quite as firm as previously believed.

    Either way, I am surprised that Optus or TPG hasn’t bought Adam Internet first. Both have the cash; both would like to boost their share of Australia’s broadband market, and both would have been quite aware that Adam Internet on the market. Strange days indeed.
    I am also puzzled by Telstra’s apparent interest in retaining the Adam Internet brand in the market. The Telstra and BigPond brands are massive; what could possibly be the point of retaining the Adam Internet brand and competing against them nationally?

    The only possible reason I can think of for doing this is to position Adam Internet as a low-cost alternative to Telstra’s expensive BigPond broadband services … or possibly to make an argument to the ACCC that, like iiNet, Telstra will be operating competing broadband brands in the market, helping to enhance competition. Of course, this won’t really enhance competition. But it would be an interesting and new position for Telstra to take. Interesting times. There’s a Telstra and Adam Internet press conference at 11AM. We’ll know more after that point.

    Note: If you’re wondering, the photo above is of Adelaide’s Torrens River, with some of its famous pelicans ;)

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    22 Comments

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    1. Nic
      Posted 24/10/2012 at 10:17 am | Permalink |

      Welp, I was thinking about using Adam when I moved house next month, but I doubt I will now. Telstra may have moved away from the ‘dark side’ in recent times, but I still hear enough about their customer service that I don’t want to deal with them quite yet.

    2. Sathias
      Posted 24/10/2012 at 10:29 am | Permalink |

      I’m always amused when the previous owner says things like a shared customer service philosophy being a pivotal reason behind a sale. I guess it sounds better than “cha-ching!”.

    3. Posted 24/10/2012 at 10:37 am | Permalink |

      Adam Internet will become Telstra’s Jetstar, offering simple good value for money services with customers having to manage their service online or get hit charges to change flight, I mean plans over the phone. Bigpond will continue to be targeted at the Mum & Dad, Nana & Grandad customers.

      • Bern
        Posted 24/10/2012 at 10:57 am | Permalink |

        +1

        A way for Telstra to ‘compete’ with lower-priced competitors without sullying the Telstra brand with discounting.

    4. Justin
      Posted 24/10/2012 at 10:54 am | Permalink |

      Adam’s dsl runs on telstra equipment, but they also sell mobile broadband and mobile services using optus, and offer fetchtv as opposed to foxtel/tbox. Are these things compatible with telstra? or will adam now use telstras network for mobile broadband and mobile phone services?

      http://www.adam.com.au/residential

      • Sam
        Posted 24/10/2012 at 12:32 pm | Permalink |

        Actually, Adam Internet have their own equipment in Telstra’s exchanges to provide DSL.

        The only ‘Telstra’ item in the AdamDirect picture is the physical copper phone line.

        • Justin
          Posted 24/10/2012 at 12:56 pm | Permalink |

          My question is will they continue to resell Optus 3g mobile broadband and mobile phone services?

        • Justin
          Posted 24/10/2012 at 12:59 pm | Permalink |

          on facebook, Adam Internet say “We will continue to offer services using Adam Internet infrastructure and current 3rd party suppliers will remain as they are today.”

          But I suspect in time, since they are owned by telstra, these services will be underpinned by Telstras infrastructure, not Optus’s.

    5. Sathias
      Posted 24/10/2012 at 11:02 am | Permalink |

      Simon Hackett sees an opportunity :-)

      http://forums.whirlpool.net.au/forum-replies.cfm?t=2000090

      • bob
        Posted 24/10/2012 at 12:52 pm | Permalink |

        Of course, they’ll change the plans and increase the costs in a couple of months, just like they always do.

        • Michael D
          Posted 24/10/2012 at 10:24 pm | Permalink |

          sure they will. Keep telling yourself that.

          The number of times either iiNet or Internode has done that over the years i can list on one hand, and that’s after i cut off my thumb.

    6. Tubsta
      Posted 24/10/2012 at 11:23 am | Permalink |

      I could be quite interested in a low-cost Telstra product, if it came to Victoria. I don’t need all the bells and whistles anyway.

      A Jetstar style product is probably what Telstra needs and come to think of it, surprised why they didn’t do this a couple of years ago. I can see this as a great strategy.

      These days, I would not be seen using Internode with their whole SA centric mantra and constant whinging about wholesale costs when they have opportunities to actually roll out gear, but choose not to. The eve grab wont create a huge amount of Adam customers for them I think, unless there was an immediate changing of prices – which Telstra is a lot smarter than some people give credit – won’t happen.

    7. nicoli
      Posted 24/10/2012 at 11:37 am | Permalink |

      To be free from monopolistic powers should be a human right.

      More competition breeds better services and products – one company controlling the lot leads to everyone paying extortionate amounts of money for terrible products and services.

      The Government should step in a ban this. Telstra has enough control of our Telecomms in this country.

    8. Posted 24/10/2012 at 12:39 pm | Permalink |

      Another cash-grab attempt by Telstra to ensure they get paid the maximum amount by the government for NBN-Converts.

      Thats all this is, nothing more.

      • Tinman_au
        Posted 24/10/2012 at 1:58 pm | Permalink |

        Yeah, that’s what I thought of when I read this, though they may also be looking at the added bonus of “testing” things as Renai pointed out.

        Otherwise it just doesn’t make much sense, Telstra would be cannibalising it’s Bigpond service if they offer an equivalent, but cheaper, service. It’s the same reason Apple ditched the “Mac clone” idea back in the day, they could see it would hurt them as a business in the long run.

      • Thrawn
        Posted 24/10/2012 at 5:49 pm | Permalink |

        Isn’t Telstra’s disconnect fees based on wholesale disconnections anyway ?

        An Adam customer connected through ULL is still a Telstra wholesale customer..

        The only trick is Telstra has to discourage people from disconnecting off fixed-line broadband and migrate to wireless or Optus Cable prior to when NBN payments apply.

    9. Luke
      Posted 24/10/2012 at 12:44 pm | Permalink |

      I’m on Adam at home and we went naked to completely get away from Telstra & their crap (bundled phone/internet/everything bills, line rental) and now they come back to haunt us! Maybe they just wanted a company that knew a thing or two about naked dsl.

    10. GongGav
      Posted 24/10/2012 at 3:24 pm | Permalink |

      What happens in 3 to 8 years when the copper lines are turned off? Do all these Adam Internet customers suddenly revert to a structure remarkably similar to Bigponds plans?

      Death by 1000 cuts springs to mind. 1 step backwards now, but shoring up customers and doing small changes, so that when the NBN rapture hits, these customers pop into the Bigpond arrangement without realising it.

    11. djos
      Posted 24/10/2012 at 3:58 pm | Permalink |

      Telstra’s plans for Adam seem to be to use it as a “Jetstar” value brand in concert with it’s “Qantas” premium brand – it makes sense as Telstra is way too cumbersome to compete in the Value space (note I dont call it budget eg a TPG/Dodo ISP).

      Adam also has the only Tier3+ Datacenter in Adelaide and a decent amount of Fiber Assets.

    12. Posted 24/10/2012 at 11:05 pm | Permalink |

      Telstra buying an ISP and saying they will keep it around as a discount brand….. Is it 2004 again? They tried this play with Hypermax and it didn’t really go anywhere.

    13. Posted 27/10/2012 at 5:32 pm | Permalink |

      I would be guessing that Telstra are interested in the WiMax — both the physical assets and the staff & expertise. All of that will get upgraded to 4G LTE of course, but very quickly Telstra can put themselves into a dominant position for wireless data delivery (around SA at least).

      • Djos
        Posted 27/10/2012 at 6:17 pm | Permalink |

        I Highly doubt Telstra are interested in Adam’s WiMAX for two reasons, first it uses free public 2.4ghz spectrum (unlicensed) and second 99% of the towers used for Adam WiMAX are existing commas towers (usually mobile towers).




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