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.


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

  3. 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. 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. 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?

    • 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!

      • 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. — 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.

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

      Get off my net fool.

  7. 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

  8. 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.

    • 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.

  9. 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.

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

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

        • 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.

  10. 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

  11. 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

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

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

  14. 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

  15. 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.



Comments are closed.