Vodafone buys iiNet's NZ business
Mobile carrier Vodafone has bought the ihug-branded New Zealand operations of telco iiNet for AU$36 million.
iiNet had been looking to sell the business since July this year. The company is understood to have rejected NZ$30 million (AU$26.5 million) and NZ$36 million (AU$31.8 million) offers from NZ Internet service providers Orcon and Compass Communications respectively, with state-owned company Transmission Holdings understood to be one of the last bidders also in the race.
ihug is the third-largest Internet service provider in NZ with over 120,000 services, behind Telecom New Zealand and Telstra's Kiwi business TelstraClear. iHug's original Australian customers have been integrated under the iiNet brand and will remain with the telco.
ihug is positioning itself to take on Telecom in its home phone market, moving from Internet service provider to telecommunications company following the government's decision in May to open up Telecom's fixed line network to rivals.
ihug has about 8 percent of the broadband, or fast Internet, market and expected all its services to be at that level within a year.
It's only been three years since iiNet bought the Australian and New Zealand operations of ihug, but iiNet has suffered recent financial setbacks and is re-focusing on its core Australian market.
Announcing the sale in a statement issued to the Australian Stock Exchange this afternoon, iiNet said the sale was expected to be complete within two weeks.
iiNet chairman Peter Harley described the sale as "a fair price", adding the funds would be used to reduce iiNet's bank debt and for working capital to continue expanding iiNet's business Down Under.
iiNet said it will retain its Auckland-based call centre under the deal, with around 100 staff.
ihug's other employees are expected to be retained by Vodafone.
In a statement, Vodafone NZ chief executive Russell Stanners said ihug would operate as a standalone company, with Vodafone itself remaining focused on mobile services.
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