WA-based telecoms operator, Amcom Telecommunications, has paid $18.3 million for a 20 per cent stake in struggling ISP, iiNet.
According to an ASX statement, the deal would allow Amcom to increase revenues while assisting iiNet to reduce network infrastructure costs. The acquisition is being funded via a limited resource facility with industrial investment company, Futuris.
Amcom managing director, Eddy Lee, said it had initially attempted to hold talks with iiNet during its recent trading suspension but was unsuccessful. The two had not previously worked together.
"I was surprised we missed a bid," he said. "So we looked at the share price on Monday [May 29, when iiNet resumed trading] and decided it was good value.
"It's a good strategic alliance for us. We wanted to partake in telco consolidation when it was appropriate. At that price it was."
Lee said Amcom's 800km fibre optic network in Adelaide and Perth would give iiNet access to high-capacity backhaul. This would also help the ISP further its IPTV and video-on-demand strategy, Lee said.
"iiNet needs money and good bandwidth, which we have in SA and WA," he said. "We can reduce costs by giving it a simpler deal that is compelling and removes dependency on Telstra."
As part of its investment, Lee said the telco wanted two seats on the iiNet board. He suggested Amcom was probably iiNet's largest shareholder and would like to know why it chose to partner with PowerTel despite having already invested in DSLAM infrastructure with Pipe Networks.