iiNet to buy Netspace for $40m - UPDATED

Stuart Corner
Monday, 29 March 2010 14:19

IT Industry - Deals

iiNet is to buy smaller ISP Netspace for $40m, a move that will take it to a total of 520,000 broadband Internet customers, in excess of $0.5b in revenue and give it a 12.4 percent share of the fixed Internet access market.

The move comes after what, according to iiNet CEO, Michael Malone, has been a decade-long courtship. He said the acquisition was highly complementary. "The weakest areas for iiNet are Melbourne and Tasmania. Netspace is a national ISP but most of its customers are in Melbourne and Tasmania."

In January Netspace scored a major contract as the preferred provider of Internet services to all Victorian Government schools for three years.

iiNet claims the acquisition puts it in third place in terms of DSL customers after Telstra (2.24m), Optus (0.53m) and ahead of TPG (0.46m). However both Telstra and Optus have a significant number of cable broadband customers. Optus told ExchangeDaily that it has 427,000 cable broadband customers. However the 2.24m figure quoted by iiNet for Telstra matches its combined retail DSL and cable customers, according to its latest half year results, not solely its DSL customers. (The original version of this article incorrectly said that iiNet's figures were for all fixed Internet numbers, not, as iiNet claims, for DSL only)

 

Malone said the acquisition would help iiNet achieve its target of 15 percent market share, and ensure its future in a market that he believes will be increasingly dominated by a handful of large players.  H

"In two or three years time having scale will be vital," Malone said. "The market will consist of three, four or five large players who have the ability to offer the next generation of top notch products and it will be very difficult for small players."

Malone said the acquisition would increase iiNet's DSLAM footprint by 17 to 345 exchanges, 12 of these in Tasmania where iiNet has only one, in Hobart. Netspace has over 70,000 broadband customers who between them take 120,000 services.

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