commentary iiNet managing director Michael Malone was right to describe his
company's purchase of OzEmail from MCI just 15 months ago as "a
The AU$110 million acquisition appears to have been the first
of a chain of events indicating a threat to telco iiNet's
business strategy and even its survival as an independent
Since that time, iiNet has publicly battled to integrate
OzEmail's 230,000-strong customer base into its billing
The project saw iiNet's customers left on hold as the
company's call centres struggled to deal with call volumes.
Finally, on 18 April the company suspended trading of its
shares, pending an announcement. As the days dragged on,
speculation mounted that iiNet was on the verge of another major
However, the truth was much darker.
"The company's financial performance in the March quarter has
been well below expectations," iiNet revealed two weeks
The embattled telco claimed the situation was not identified earlier due to "deficiencies in forecasting and clerical errors in revenue recognition that have only recently emerged".
The company's shares remain on hold, and iiNet is reportedly
fielding offers from parties interested in a merger or
Looking a little into the future, whether iiNet will be
purchased is obviously a critically important issue for its
However given some analysts believes the underlying business
remains strong, the real issue may prove to be whether iiNet can
continue its strategy of leveraging technological leadership.
One of iiNet's main differentiating factors in the market is
that early investments in infrastructure have allowed it to get
ahead on a technological basis compared with slower moving
competitors such as Telstra and Optus.
For example, iiNet has offered 24Mbps ADSL2+ broadband and
Internet telephony services for some time. Most Australian telcos
are still stuck on 1.5Mbps.
It is likely iiNet's management will move more conservatively
now that their financial dirty laundry has been so publicly
aired. They'll need to remain focused on consolidating their
assets after what is expected to be a large drop in iiNet's share
price when the stock resumes trading.
This change of focus was signalled when iiNet's chairman Peter
Harley stepped up to executive responsibilities on 11 May.
The company also appointed GEM Consulting to facilitate a
strategic review of iiNet, aiming to "refine the company's growth
Reading between the lines here, it appears as if iiNet may
believe that its infrastructure investments were growing faster
than its customer base could support.
What do you think of iiNet's financial problems?
Will the company's infrastructure investments continue unchecked
or be cut off at the neck? Send your thoughts to firstname.lastname@example.org.