iiNet to offload Canberra FttP network to NBN Co for $9m

iiNet and NBN Co have entered an agreement to sell the TransACT fibre to the premise network to NBN Co for AU$9 million.

iiNet will sell the Canberra fibre to the premise (FttP) network it acquired when it took over TransACT to NBN Co in a deal worth AU$9 million initially and up to AU$14 million, subject to regulatory approval.

The TransACT network currently covers 8,500 premises, and a further 4,500 premises are planned or already under construction. iiNet announced that the deal would be settled over the next two months subject to Australian Competition and Consumer Commission approval.

Under the deal, TransACT will also complete the construction of pit and pipe infrastructure in new estates until 2017 and then transfer ownership to NBN Co. NBN Co would also get access to ducts across the ACT as part of the deal.

iiNet had been looking to sell the network to NBN Co since the takeover of TransACT in 2011 . In addition to the fibre network in the ACT, TransACT also owns a HFC network in Geelong, Mildura and Ballarat. Under legislative changes made as part of the implementation of the National Broadband Network (NBN) policy, iiNet would not have been able to expand these networks, and the company was concerned that NBN Co would overbuild in those areas.

In late 2012, iiNet CEO Michael Malone warned he would undercut NBN Co on prices in those areas if the company did decide to overbuild rather than buying out iiNet's networks.

"NBN can't force us to turn it off; they would have to buy it off us or compensate us to shut it down," he said at the time.

"Our cost base is about half of NBN's, if they really want us to stay there and compete for that; bring it on," he said. "If they would like to do a deal with us to shut that down as they have with Telstra and Optus, then we stand ready, and so do our bankers."

Malone said he would like NBN Co to buy out the networks at AU$1,050 per premise, in line with what Telstra and Optus were receiving for their respective NBN deals. Excluding the premises yet to be constructed, the price the company will extract from NBN Co is approximately AU$1,058 per premise.

If the last 4,500 premises are completed, the deal will be worth AU$14 million in total.

Today Malone said that TransACT customers on the fibre network will be contacted soon to discuss transitioning over to the NBN over the next 12 months.

NBN Co will work to swap over equipment when a customer orders a service on the NBN, NBN Co CEO Mike Quigley said.

Quigley also indicated that the deal would see NBN Co save money on construction.

“This is a good deal for iiNet, for NBN Co and for residents passed by the TransACT network in the ACT. For our part, it brings forward NBN Co’s ability to earn revenues, reduces construction costs and limits community disruption," he said in a statement.

iiNet spent $60m to acquire TransACT in 2011.