iiNet has confirmed it is in talks to acquire Melbourne-based ISP, Netspace.
iiNet told ARN in February it was interested in purchasing ISPs on the East Coast to expand its business and was in discussion with a number of potential parties.
Following media speculation today that a $75 million buyout was in the works, iiNet called a trading halt and issued a statement confirming it is negotiating a deal with Netspace, as well as several other parties. However, iiNet claimed the suggested purchase price was a long way below the price range quoted in The Australian Financial Review, among others.
“The discussions are at an early stage and remain incomplete, and the iiNet board has taken no decision regarding the potential acquisition,” iiNet said in an ASX statement.
The Perth-based ISP’s trading halt is expected to be lifted by March 15. Independent telco analyst, Paul Budde, claimed a deal between iiNet and Netspace would revitalise competition in the ISP sector. Taking on another mid-sized ISP was better than picking off smaller companies at the bottom of the list, he said.
“This requires some of the mid-sized players such as iiNet to become stronger,” he said. “The reality of broadband is it’s largely a commodity article and you need to have scale in order to be competitive and to provide good content services; size does matter.”
Budde saw iiNet’s purchase of Netspace triggering other ISPs to look into further acquisitions, but added industry consolidation wasn’t occurring fast enough.
“You also have hundreds of niche players in the local market particular products, which is great, but the majority of the market is very competitive where customer service, pricing and, again, size matters,” he said.
“Either you be a niche market player or if you want to compete in the wider market, you need to grow in size and the only way is to do that is through more consolidation.”