Kogan Mobile's demise was 'the best news': iiNet

iiNet CEO Michael Malone has said that the end of Kogan Mobile is good news for the sustainability of the mobile virtual network operator market.

iiNet CEO Michael Malone has described the end of Kogan Mobile as "the best news" for the mobile reseller business, stating that the business model for the company wasn't sustainable.

The Australian mobile telecommunications industry is gearing up for the 115,000 Kogan Mobile customers to begin porting their numbers over to a new provider after Telstra this week ended the agreement with Kogan's wholesale provider ISPOne, when the latter was placed into administration.

Earlier this week, Kogan Mobile warned that its departure from the mobile virtual network operator (MVNO) market should come as a warning sign to other MVNOs that will be squeezed out of the market by the three network operators Telstra, Optus, and Vodafone.

As of the end of June, iiNet has 126,000 active mobile services on the Optus network. Unlike Kogan Mobile, however, iiNet only signs up customers who already have a fixed-line service with iiNet. On the news of Kogan Mobile's demise this week, CEO Michael Malone was elated.

"Some of the best news to happen in the last week was for [Kogan Mobile] to disappear from the market. It was unsustainably low [and] I think everybody knew that as well," he told journalists on a conference call on Wednesday.

Recalling the similarities with the demise of One.Tel in 2001 , he said that ISPOne was always going to get caught out in how it was charging Kogan Mobile for the Telstra services.

"ISPOne was the meat in the sandwich there where they were paying Telstra per-minute rates and they were selling it onto Kogan at unlimited rates," he said.

"There was another ISP that this happened to sometime ago that also had the word 'one' in its name."

iiNet's wholesale operator Optus confirmed last week that it had signed long-term agreements with around 20 of its MVNO partners, including iiNet, and Malone said that he believes the market has a bright future — albeit one not focused on undercutting Telstra, Optus, and Vodafone on price.

"I think the MVNO market is not dead; it's just that MVNOs who want to solely differentiate by being cheaper than the carrier they buy from — that's not a sustainable business model," he said.

"We don't actually go after Optus' customers by saying we've got the same product at a cheaper price. We only sell it to iiNet existing [customers]. The benefit in there is hopefully bundling in it with the same bill, a different range of handsets, and the fact that you get to deal with iiNet instead of Optus, which we see as an advantage, as well."

iiNet reported this week that it now has 20,000 customers on the National Broadband Network (NBN), with 12,000 on the fibre and 50 percent taking up services with download speeds faster than 12Mbps. Malone told journalists today that around 10 percent of the fibre customers are on the 100Mbps plan.

He also revealed that iiNet has been testing the UNI-V voice service on the NBN for the past few months, after its subsidiary Internode released a UNI-V product late last year . Malone said the product is due out in September or October, but that iiNet is not in a great rush, given the lack of demand and the existing voice-over-IP product.

"To be honest, it's not something iiNet is seeing a great demand for," he said. "We're not going to be offering a standard UNI-V service, so if there's a grandma who doesn't want broadband and just wants her phone to work, we're probably not going to be the telco for her," he said.

The only difference between the VoIP product and the UNI-V product, he said, is the port that the customer connected the phone into. The cost to iiNet to offer the service is the same, he said. It would, however, allow iiNet to offer support for EFTPOS and fax machine services on the NBN.