Communicate

How The iiNet Deal Affects Internode Customers

Despite the NBN-inspired imminent $105 million buyout of Internode by iiNet, there will be no short-term change to the products offered by either company. But in the long term, offerings such as iiNet’s expanded Freezone are likely to be available on plans from both iiNet and Internode.Internode will continue to operate as a separate division with its own brand. Speaking in a conference call to discuss the deal this afternoon, iiNet CEO Michael Malone said that there would be no immediate change to any of Internode’s existing consumer plans. “There’s no short term intention to do that,” he said.

The first area where changes might be seen will be in the content area. “Internode will get extra Fetch TV channels and we’ll expand their access to our Freezone content,” Malone said. While both Internode and iiNet offer unmetered access to the ABC’s iView, one obviously appealing feature for Internode customers would be the unmetered iTunes store access which iiNet customers already enjoy. That may come to Internode as well, but not for a while. “In terms of the specifics, we’ll hammer that out over the next few months,” Malone said. “It’s still to be decided.”

Other ISPs which iiNet has acquired, notably Westnet and Netspace, have ended up with virtually identical pricing plans to iiNet despite operating as separate brands. However, Malone says that was because their pricing models were already closer, notably in the area of peak/off-peak timing, something which iiNet, Westnet and Netspace all use, but Internode does not. “I wouldn’t be surprised to see a lot of things get more similar over time but there’s no intention to do that in the short term,” Malone said.

At the back end, the companies will merge their networks and exchange equipment, as well as their backhaul arrangements. However, there’s no immediate intention to cut staff numbers. “It’s very much a business as usual approach we are taking for this. We are both very well scaled for the size of our respective customer bases,” Malone said.

What it means for the company

While no-one expects a major ISP merger to happen three days before Christmas, rumours of iiNet and Internode joining forces have been a staple of the local industry for years. “Michael Malone and I have been in conversation about this particular marriage on and off for more than 10 years,” Hackett said, recalling an email he sent to Malone about the topic back in 1997. “This deal was done at the moment it was ready. It’s taken a long time to reach the point where it makes sense. “

So why sell out? Hackett says the National Broadband Network (NBN) is the main incentive. “We are heading into the NBN era and it’s all about scale. We would have had the money in the bank but we wouldn’t have had scale. The size of Internode on its own is right at the bottom edge of what we’ve considered to be viable for an NBN retail provider. It would be a dangerous thing for us to go into that era only just being big enough.”

Hackett will continue to run the company, and gets shares amounting to a 7.5 per cent share of iiNet as part of the buyout. He has agreed to terms which block him buying more iiNet shares for a period of 12 months. But he seems very content with the deal. “The things we do as organisations are brilliantly aligned culturally and technically. Our cultural similarity is enormous. The two of us have a customer satisfaction rating that leaves everyone else in the dust.”