iiNet announces Netspace takeover talks

Internet service provider iiNet has announced this week that it is in discussion with fellow provider Netspace regarding a takeover bid.

The alleged takeover plans were first reported in the Australian Financial Review on March 11. The initial report suggested that iiNet was to buy Netspace for between $60 and $75 million, however more recent reports have claimed that the actual figure is well below this.

Netspace was founded in 1992 by chief executive Stuart Marburg and technical director Richard Preen. The Melbourne based company provides internet to around 80,000 customers, and is one of the few internet service providers (ISPs) to offer ADSL2+ broadband services in Tasmania.

If iiNet, which already owns fellow Western Australian based ISP Westnet, was to purchase Netspace it would take the number of iiNet customers up to around 600,000. This number is 400,000 short of the 1 million customers iiNet chief Michael Malone would like to have by the time the National Broadband Network (NBN) Co access becomes available.

"We said we want to get 15 per cent market share. That's approximately 1 million customers. We think we need to get there," he said. "We have to be NBN ready."

These talks come after iiNet lost its place as third largest ISP in Australia to New South Wales based ISP TPG. This rearrangement is due to the recent announcement from TPG that it plans to overtake internet carrier Pipe Networks.
Pipe Networks owns a large metropolitan cable network, and has just finished laying a PPC-1 cable from Sydney all the way to Guam, increasing connectivity across the Australasian region.

Earlier this week, TPG confirmed that its final bid for the company would be $373 million. This equates to $6.30 cash for each Pipe share held. A meeting to finally approve this proposal is to be held today.

While the TPG acquisition of Pipe Networks has all but been confirmed, iiNet stress that their talks with Netspace are in their infancy.

"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 a statement today.