iiNet acquires national status, $260m cap

Perth ISP iiNet has lifted its market capitalisation from $36 million to $260 million this year -- largely due to aggressive expansion incorporating nine rival ISP acquisitions.

Michael Malone, managing director at iiNet, said the company's $53.8 million buyout of New Zealand-owned ISP ihug had given iiNet a leg-up on the eastern seaboard and roughly doubled its overall customer base to about 300,000. Before the ihug acquisition on 16 September, iiNet had some 130,000 dial-up, DSL, satellite and telephony customers.

The ISP had also doubled the number of shares it had on issue, Malone added.

“We are now the fifth largest ISP in Australia and the third largest in New Zealand,” he said. “We had eight other smaller acquisitions starting with one in Rockhampton late last year, but they were getting progressively larger.”

Malone said the consumer-focused firm planned to continue its steady expansion in the coming year, paying particular emphasis to DSL. iiNet has about 42,000 DSL customers and considers itself Australia's number two DSL provider.

However, reliance on Telstra's network was limiting further revenue growth. “We are looking at putting some DSLAMs into Telstra exchanges next year. We are starting to push down some costs,” Malone said. “We've got a pretty good history of getting our own infrastructure in place and we're doing that for ADSL.”

Malone said the company would initially target exchanges where it already had significant numbers of DSL customers.

He said iiNet had outgrown expansion possibilities in its home state. Today, about 75 percent of iiNet customers were based outside Western Australia.

iiNet chairman Peter Harley told iiNet's AGM on 28 November that the company had reported its highest ever revenue and profit, of $40 million and $5.2 million respectively, in the 2003 financial year. Cash reserves totalled $8.6 million, while earnings per share increased to 13.4 cents each.

“Through a series of selective acquisitions, iiNet has acquired and integrated more than 40,000 subscribers outside Western Australia ... [which] enabled the company to commence the national rollout,” Harley told shareholders.

“This rollout has gone to plan with acquired clients on track to be on iiNet infrastructure in all states, excluding the Northern Territory, by early January.”

“Prior to ihug, we were present on the eastern seaboard, but mainly in regional areas. We had a strong presence in Tasmania and Victoria, and were pretty strong in broadband,” Malone said.

He would not rule out further acquisitions in the coming year. “We'll keep on looking. There's still 550 ISPs out there and I'd say the market will be continuing to consolidate,” Malone said.