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Telecommunications PowerTel pumps $14m into iiNet
Telecommunications PowerTel pumps $14m into iiNet | PowerTel pumps $14m into iiNet |
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| by Stuart Corner | |
| Friday, 26 May 2006 | |
  
iiNet fesses up to poor forecasting and flawed book-keeping iiNet makes $15M DSLAM gamble iiNet on track for 100,000 DSLAM customers PowerTel is to invest $14 million for a 14.9 percent stake in iiNet and gain exclusive wholesale access to iiNet's DSLAM network in a deal that will effectively give both companies access to DSLAMs in 262 exchanges, which they claim will be the second largest network in the country. PowerTel's DSLAM network, originally Request's was built to serve business customers and is concentrated in metro area exchanges. iiNet has a much stronger presence in regional Australia and claims to have Australia's largest ADSL2+ network. However with Optus rolling out aggressively this lead is likely to be short-lived. The announcement ends weeks of speculation about the future of iiNet since it suspended trading in its shares on 20 April, significantly revised downwards its EBITDA forecast and admitted to deficiencies in forecasting and clerical errors in revenue recognition. Following today's announcement trading in iiNet shares will resume on Monday 29 May. "The strategic alliance provides PowerTel and iiNet with significant coverage in regional centres and all major metropolitan capital cities around the country through, effectively, the second largest access network in Australia," the two companies said in a statement. In an investor presentation in March, before it revealed its financial problems, iiNet said it had DSLAMs in 210 exchanges supporting 85,000 customers with 120,000 ports deployed and was planning to spend a further $15 million, to be funded by debt, installing DSLAMs in a further 150 exchanges. PowerTel managing director, Paul Broad, said the alliance would accelerate the company's access network roll-out by two years with minimum capital outflow and eliminating network duplication. PowerTel earlier this year flagged its intention to have DSLAMs in about 150 Telstra exchanges by year end. "This strategic alliance has significantly accelerated PowerTel's progress in the wholesale consumer, small business broadband and voice markets." According to iiNet managing director, Michael Malone, "This will bring forward more than $10 million in revenue growth for PowerTel and its wholesale partners." According to Malone, "the combined national IP network with 262 exchanges will offer iiNet, and PowerTel's wholesale customers, competitive broadband and voice products, enabling them to compete against Telstra and Optus without having to build a network." In April PowerTel launched a wholesale 'carrier grade' VoIP service to be delivered over its own network of DSLAMs and sold through its channel partners. "PowerTel is a large and successful wholesaler already, with existing sales and support facilities and a well established customer base," said iiNet executive chairman Peter Harley. Broad said PowerTel would continue with its strategy of not competing against its wholesale channels. PowerTel will pay cash for approximately 16.36 million iiNet shares in iiNet at 85 cents. According to a joint statement, "The issue will occur in two tranches, and the second tranche of approximately 3.76 million shares is conditional on various matters principally the satisfactory conclusion of certain operational arrangements between the parties and iiNet share price not trading below 75 cents for 10 consecutive trading days before their issue which is expected to occur no later than 22 August 2006." PowerTel will have the right to appoint one director to the iiNet Board following completion of the first tranche, which is expected to occur on 5 June 2006. |
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