iiNet buys Netspace for $40m

iiNet has acquired fellow internet service provider (ISP) Netspace for $40 million.

iiNet CEO Michael Malone (Credit: iiNet)

The acquisition will give iiNet a further 70,000 customers, nudging its market share to 12.4 per cent, just shy of what iiNet chief Michael Malone has previously said that he wants to reach in preparation for the activation of the National Broadband Network.

Thanks to the acquisition iiNet will reach 520,000 broadband subscribers, 300,000 of which are "on-net" — connected to its own ADSL-connected exchanges. In total, including other services such as dial-up, iiNet will have 920,000 customers after the acquisition.

The acquisition bumps its broadband subscriber levels above those of competing ISP TPG, which this month reported adding 54,000 fixed line broadband customers in the six months to 31 January, netting it a total of 442,000 customers in the category.

iiNet claimed the acquisition has boosted its profile in New South Wales, Victoria and Tasmania. iiNet has only a limited ADSL footprint in Tasmania, while Netspace last year launched 10 of its own DSLAMs in the state.

The acquisition will be 100 per cent debt-funded and is expected to proceed by 30 April 2010.

It expected Netspace to generate $70 million in the 2011 financial year and add another $8 million in earnings before income tax and depreciation profits.

The company requested its second trading halt on the Australian Stock Exchange this morning, after last month issuing a halt following speculation that it was planning to acquire Netspace for between $60 million and $70 million.