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iiNode deal makes sense, can Hackett stay vocal?

The analyst consensus on iiNet buying Internode is that the deal makes a lot of sense, but it would be a loss to the industry if Simon Hackett stopped being a strong voice.
Written by Suzanne Tindal, Contributor

The analyst consensus on iiNet buying Internode is that the deal makes a lot of sense, but it would be a loss to the industry if Simon Hackett stopped being a strong voice.

"I'm not surprised about this development," Ovum research director David Kennedy said. "iiNet has been in the market for two to three years and Internode has often expressed reservations and concerns about the need for scale in the NBN environment."

"Internode was a good independent ISP," according to IBRS advisor Guy Cranswick. "The possibilities either under or with iiNet make clear sense and consolidation of this order is overdue in the market. With business conditions slowing growth isn't a sure possibility and managing debt and related financing issues is more critical.

"As has been said in the past, NBN world customer reach and technical capacity in network terms are essential."

Paul Budde from BuddeComm echoed Cranswick's and Hackett's own words on scale: "This structurally separated future will provide us with a levelled playing field and that will of course increase competition but will also lower the [basis access] margins. Size is therefore of critical importance to companies providing basic access services on the NBN."

Budde continued, "Under the previous regime there was more room for smaller players to survive ... with the NBN however, you are either big or you become a niche market player outside the pure access market."

"BuddeComm's greatest worry regarding the current NBN wholesale regime (with 121 PoIs) is that it will lead to a oligopoly of a handful of players who will dominate the retail market (similar to but worse than the Gang of Four in the peering market). So we do need enough strong players to ensure there will be real competition here," he said.

Kennedy agreed that the market would end up with only a "handful" of national players and said that the competition regulator needed to be on its guard now.

"The [Australian Competition and Consumer Commission] is going to have to start paying more attention to these acquisitions in the future," he said.

Kennedy agreed with iiNet CEO Michael Malone, however, in saying that the regulator probably wouldn't step in unless a carrier bought a telco the size of TPG. He believed that there would be five carriers left after industry consolidation finished: Telstra, Optus, iiNet, TPG and Vodafone (which has just made its entry into the fixed-line market via an NBN trial).

Both Budde and Cranswick expressed hope that Hackett would remain active as an advocate for industry issues. He will remain in charge of the Internode arm of iiNet, but whether he will continue to be as vocal as he has in the past is yet to be seen.

"[Internode has] contributed to the government policy and industry strategy debates and the current shape of the market would not have been the same without them; John Lindsay also needs special recognition here," Budde said. "So it is certainly with sadness that we will see this company losing its independence and we are sure Simon and his team will have mixed feelings about all of this."

Cranswick agreed: "Can we expect to see Simon Hackett still active in the market? It would be loss if he stayed quiet after this deal."

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