Telco iiNet's finances have taken a
hammering as the company announced its earnings before interest,
tax, depreciation and amortisation (EBITDA) to the year ending 30
June would be 39 percent lower than previously expected.
"iiNet is now expecting an EBITDA result of AU$24.6 million,
before any abnormal items, down from the previous guidance of
AU$40.1 million," the company said this afternoon in a statement
to the Australian Stock Exchange (ASX).
The announcement follows five weeks of uncertainty for iiNet
investors as the company suspended trading of its shares on 18
April, citing the need to identify clerical errors in revenue
The company's executive chairman Peter Harley said it was "now
obvious" that iiNet's internal processes had not kept pace with
its rapid acquisition trail, which has recently included large Internet
service providers iHug and OzEmail.
"In every other six month period since 2001, there has been
either a large acquisition or a major integration," said Harley.
"This is the first clear period without such activity."
iiNet said its auditors Ernst & Young had identified
several factors behind the lower EBITDA guidance.
Those included one-off costs relating to the OzEmail
integration and immature processes and procedures between iiNet's
finance and acquisitions teams surrounding forecasting.
The auditors added that iiNet also had "underlying
profitability issues" that were being addressed by the telco.
iiNet expects to complete a full strategic review of its
business in conjunction with GEM Consulting by the end of
In related news, business and wholesale telco PowerTel said it had committed to a
14.9 percent placement in iiNet, based on the Perth-based
telco's current issued shares.
In return, iiNet will provide PowerTel with exclusive
wholesale access to its extensive broadband network, one of the
nation's largest. iiNet has not previously allowed other telcos to utilise its infrastructure, and the move will be seen as an attempt to wring greater returns from the investment.
The move will allow retail telcos who utilise PowerTel's
network to also utilise iiNet's broadband network, which allows
ADSL speeds of up to 24Mbps.
"This strategic alliance will give iiNet economies of scale
and therefore improve the return on our network," said iiNet
managing director Michael Malone.
"It will also finally give other ISPs and Australian consumers
an opportunity to get access to real broadband speeds, rather
than waiting for the incumbent [Telstra]," he added.
Telstra currently sells wholesale ADSL broadband at relatively slow speeds of up to 1.5Mbps.
"PowerTel is a large and successful wholesaler already, with existing sales and support facilities and a well-established customer base," said Harley. "We believe that PowerTel is far better positioned to drive wholesale sales nationally and enable iiNet to leverage the value of its network."
PowerTel said it would not compete with its wholesale customers in the retail field.
iiNet claims to be Australia's third-largest Internet service provider and is also gaining market share in the voice market, with recent offerings including an Internet telephony service.
iiNet said the share trading suspension would be lifted and trading on the ASX would resume on Monday.