SP Telemedia to buy Pipe Networks for $373m

SP Telemedia, owner of TPG and Soul internet service providers, has announced its intention to acquire Pipe Networks for $373 million.

The acquisition will give SP Telemedia an extensive dark fibre network across major Australian business centres, such as Brisbane, Melbourne and Sydney, and will also give it Pipe Networks' newly lit-up Sydney to Guam international cable.

"PPC-1 gives us a competitive advantage with access to international bandwidth," SPT executive chairman David Teoh said in a statement today.

The deal confirms a report published by ZDNet.com.au last week when Pipe Networks issued a statement that it had been pitched something it needed to consider.

In its statement to the Australian Stock Exchange, SP Telemedia reported it had acquired 2.8 million of Pipe Networks' shares under an agreement for $6.30 each, representing a 15 percent premium on its average price over the past three months. At the close of its last day of trading on November 3, prior to the request by both companies for a trading halt, Pipe Networks shares were trading at $5.99.

Pipe Networks' directors, Bevan Slattery and Stephen Baxter own 27 percent of the outstanding shares in Pipe and have granted SP Telemedia call options over a portion of these. SPT owns 19.9 percent of Pipe's shares as of today.

Michael Malone, managing director of iiNet, an early PPC-1 customer and competitor to SP Telemedia, said the deal was no threat to its status with PPC-1 and that iiNet was "comfortable with the deal".

"Most of our international capacity is presently with Telstra," said Malone, "so this really doesn't change the landscape very much. It's the nature of our industry that it's networked, by definition... We all buy stuff from each other anyway."

During the financial crisis last year, Pipe Network's financiers had pulled funding for the new cable, casting doubt on the project's continuance. However several customers, including iiNet and Internode, had agreed to sign up as early customers prior to the pipe's launch, effectively saving the cable. The cable has been credited with driving down international data carriage costs for Australian ISPs and consumers.

Malone said he was delighted for Slattery and Baxter. "They've had a stellar run, taken some ballsy risks, and changed the landscape of Australian telecommunications forever. Good on them for achieving an attractive exit price."