iiNet is expected to report a full-year loss after lowering its EBITDA estimates from $40.1 million to $24.6 million. The revised forecast comes off the back of investigations into the company's financial procedures.
In an ASX statement, the WA-based ISP said revenues were forecast to hit $250 million for the year to June 30. Managing director and founder, Michael Malone, said he was extremely disappointed to announce the downgrade. However, he was adamant the company was still in good shape.
iiNet issued a profit warning earlier this month after experiencing a poor first three months to the year. According to the ISP, discrepancies in financial reporting and clerical errors had hidden the results.
Executive chairman, Peter Harley, said Ernst & Young investigations had shown financial processes had been inadequate to cope with rapid expansion. The ISP has made several acquisitions during the past few years including iHug and OzEmail.
The lower EBITDA guidance for this year also stemmed from one-off costs relating to the OzEmail purchase, he said in a statement.
iiNet is now conducting a strategic review of its business in conjunction with GEM Consulting. It is due to be completed by the end of June. The review will take into account product contributions as well as profitability and future growth.
iiNet shares, which had been suspended since April 18, resumed trading this morning.
The revised EBITDA was followed by news of a strategic alliance with PowerTel. The telecoms wholesaler announced it would invest nearly $14 million to acquire a 14.9 per cent share in iiNet.
The partnership would give PowerTel access to iiNet's network under an exclusive wholesale arrangement, while giving iiNet additional wholesale network services.
PowerTel managing director, Paul Broad, said the deal would accelerate its network rollout by two years with minimum capital spend. He said it should bring in $10 million in additional revenue through the introduction of consumer, small business and voice services.
Malone said it would also allow both to compete against Optus and Telstra without having to build a network.