Internode falls to iiNet acquisition temptation

Popular Adelaide-headquartered national ISP Internode, a pioneer in Australia’s ADSL2+ market and vocal critic of National Broadband Network price strategies, is to be acquired by number two broadband provider iiNet.

The $AU105 million buy, announced on December 22 to the Australian Securities Exchange, may not be greeted with universal glee by Internode’s devoted and relatively tech-savvy fans.

However, it continues the ongoing ISP consolidation trend in the Australian market, with fixed line growth flattening and with the future of DSLAM infrastructure grandfathered by the rollout of NBN fibre.

At least for now, Internode has said that it will operate as an independent business unit of iiNet, perhaps in an attempt to maintain the junior telco’s reputation as a “geek’s ISP”.

Internode also operates a CBD fibre network in Adelaide, along with VoIP, mobile broadband resale, and some regional wireless services in South Australia.

However, iiNet will also be acquiring a company with extensive experience in getting around Australia’s Internet transit service bottleneck by acquiring its own international capacity, and buying transit in the USA.

iiNet’s announcement to the ASX says it will acquire 190,000 customers and 260,000 active services, with anticipated revenue of $AU180 million for 2012. Internode founder, glider pilot and Tesla enthusiast Simon Hackett will be issued 12 million iiNet shares, with the balance of the transaction to be paid in cash.

Hackett has agreed to remain with iiNet for twelve months after the acquisition is completed, which is expected to be at the end of February 2012.

As was reported earlier this year, Internode had undertaken a mangement restructure which at the time gave rise to speculation that the company would be put on the market.

iiNet is itself subject to takeover speculation as TPG has taken a small, strategic stake in the operation. ®