opinion I am completely unsurprised by the news this morning that iiNet is in talks to buy rival Netspace for what the AFR said was between $60 million and $75 million and what the ISP itself said later was a lot less.
Indeed, having known the principals at both the ISPs — iiNet chief Michael Malone and Netspace MD Stuart Marburg — for some time, I would be surprised if the pair hadn’t flirted occasionally with the idea of a merger on and off for the past decade.
After all, they’ve been leading their respective companies in the same industry for almost two decades. And that industry — due to the fact that it sprang up in the 1990s and grew extremely rapidly — has had a massive history of consolidation.
There must have been quite a few occasions — occasions just like the Australian Telecommunications User Group’s annual awards dinner, coincidentally to be held tonight, where Marburg and Malone made eyes at each other and thought … “what if?”.
As Malone told ARN about acquisitions at the company’s recent financial results briefing … ““In many cases, it is just about when the time is right for them to exit the market and a price point can be reached where we both feel comfortable. Westnet is a good example – we were in talks for eight years. That is just part of the game.” For Netspace, that time may just be now.
In the same article Malone even noted the company was looking at East coast ISPs … which for most in the telco industry would have brought to mind Netspace and its strong Victorian and Tasmanian customer base.
It’s also been quite a while since iiNet bedded down its $81 million acquisition of the fellow Westnet — it’s biggest acquisition.
If you look at iiNet’s history, you’ll quickly realise that it hasn’t gotten to its position as arguably the third or fourth largest internet service provider in Australia through organic growth alone. Malone might be one of the nicest guys in Australia’s telecommunications industry — but from a business perspective he has played the game hard over the past twenty years, acquiring other firms en-masse.
In Australia’s ISP industry, iiNet during the late 1990’s was the equivalent of Google or Microsoft in Silicon Valley today. If you’ve got a hot ISP startup with a fair few customers and a desire to cash out, it would have been a good idea to give iiNet a call.
In other words, with the Westnet acquisition out of the way, it’s time for iiNet to start looking around for further expansion opportunities.
Growth in the ADSL broadband market — iiNet’s core area of strength — has slowed down. It’s only natural for companies like iiNet to buy to build scale.
Ultimately I think a Netspace/iiNet tie-up would be a good arrangement for both companies if the right financial deal could be met. iiNet puts quite a high value on customer service and providing fair value plans and value-add services (for example its pending IPTV launch). I can’t imagine too many Netspace customers are going to cry too hard about an acquisition.
For iiNet, Netspace offers a company with a similar company and customer culture to its own that would give it an additional instant level of scale and revenue to continue pushing up against Australia’s major ISPs, Telstra and Optus. And there’s the nice little network of DSLAMs Netspace has in Tasmania to keep in mind.
It would also offer the company’s shareholders an easy exit strategy and a comfortable home for their baby that wouldn’t involve the stress of publicly listing or other options such as selling out to private equity.
On the flip side, we’ve already been hearing from some customers today that they’re not happy with how iiNet has developed its customer support offering as it has grown. So it may not all be roses.
Are you an iiNet or Netspace customer? What do you think of a potential merger between the two ISPs?
Image credit: iiNet
Netspace have been providing me with ADSL2+ B./B. for the previous 3 years and like all I.S.P.s there have been good and bad times. Value for money is synonymous with the Netspace brand, accompanied by Australian call centers staffed by polite knowledgeable C.S.R.s the onus will be on iiNett to prove themselves to me if the sale proceeds.
From a business perspective the acquisition of smaller I.S.P.s by there larger counterparts makes perfect sense especially considering the N.B.N. is on the horizon.
I was on Netspace for a while, but from memory I switched to iiNet because of the chance to be on an ADSL2+ DSLAM, with the higher speeds etc. I found them quite good at the time! And I’ve always like the executives that I have spoken to there, eg Stuart Marburg.
I agree the industry consolidation will continue, there is a fair bit of money out there, and people will want to get as much scale as possible before NBN.
I am a netspace customer and I would be quite happy with the merger. Once my netspace contract finished I was going to move to iinet anyway. I’d like to support a company that isn’t afraid of sticking it to AFACT, Telstra or the the government.
Im a netspace customer and would prefer iinet not to take netspace over, netspaces plans offer higher quotas at lower prices which is what matters to me, also netspaces customer service is locally based and there is certainly no harm in being with an isp whose headquarters and technical base is a 20 mins drive from home
heh fair call — you must be a Melbournite? ;)
I think iiNet is definitely not the cheapest, but you do get solid reliable service and fairly good customer service. I wonder whether they would maintain the separate Netspace offerings (as they seem to have done with the Westnet acquisition) if they proceeded with the buyout. I guess only time will tell.
“I’d like to support a company that isn’t afraid of sticking it to AFACT, Telstra or the the government.”
+1 to that :)
I have been with Netspace for two years and in that time have had one out, which is pretty reliable service. When I have had to talk to someone their service has been good,if they change I probably would shift to another carrier other than iiNet
Comments are closed.