iiNet on Tuesday announced it has bought OzEmail's consumer Internet business from MCI in a deal valued at $110 million. This will see it become the nation's third largest ISP behind Telstra and Optus.
The cash component of the buy is valued at approximately $105 million.
The deal sees iiNet grow its broadband subscriber base by an additional 47,000 and its total customer count will now reach 620,000. As of 31 December, 2004 iiNet had 390,000 customers with 73,000 of them on its broadband service.
However, OzEmail parent MCI will keep its core business. This includes wholesale services to carriers and ISPs as well as IP, data, security, hosting and managed services for corporate customers.
In a brief statement issued to the ASX, iiNet managing director Michael Malone said is was a "...momentous time for iiNet. We're blending innovative, cutting-edge products like our 'fast-as-you-can-go' broadband plans with one of Australia's best loved ISP brands."
According to an investor presentation delivered by Malone to shareholders, there were several reasons for the acquisition. He said OzEmail was the last "large" ISP acquisition in Australia; it was an Iconic brand name; it had an ideal geographic and demographic customer base; and lastly it enhanced iiNet's rollout of DSLAMs.
With access to more DSLAMs, iiNet also hopes to expand its "Broadband2" plans, launched two weeks ago. The service can offer customers speeds of up to 8Mbps.
It has been a big February for iiNet. At the beginning of the month iiNet branched out into telephony with the launch of its iiphone telephone service. This allows users to combine their line rental, local calls, calls to mobile phones and long distance calls, along with Internet, all on the one bill.
In 2004 iiNet made $7.2 million profit on the back of $64 million in sales. This was up 94 per cent on $3.2 million profits from the year before.
OzEmail, which was founded by Malcolm Turnbull, Sean Howard, and Trevor Kennedy, was sold to MCI WorldCom in December 1998.