iiNet merger 'inevitable'
The former chief strategist of iiNet says TPG's takeover of the internet provider was inevitable to fight Telstra's "predatory activity" in the marketplace and to compete in the NBN rollout.
The company's recently retired chief regulatory officer Steve Dalby told WestBusiness he bemoaned the loss of iiNet's independence but believed rationalisation was needed in Australia's telco market, which was skewed in favour of Telstra.
"They are the incumbent and they continue to get handouts on the NBN exercise," Mr Dalby said. "And the NBN is going to change the face of Australian telecommunications.
"Going head-to-head against Telstra, with the sort of funding they are getting from the NBN puts companies like TPG, M2 Telecommunications and iiNet on the back foot.
"And to build that scale and economies of scale to tackle the issues they are facing in an industry that continues to change, yes, a merger was inevitable."
A combined iiNet and TPG's broadband market share would be about 25 per cent, compared with Telstra's 42 per cent.
The comments come as there is renewed speculation that a competing offer from M2 Communications - the owner of Dodo - or Optus' parent company Singtel is in the works, with iiNet yet to trade close to TPG's $8.60-a-share offer.
Asset manager and 6 per cent per cent shareholder BT Investment Management has criticised the deal and called for a higher price but has not yet committed to a yes or no vote.
Others, such as company founder Michael Malone, have openly opposed the deal and declared TPG the wrong fit for iiNet.
The takeover, which will not be voted on until June, needs the support of 75 per cent of the shares voted. The stock closed at $8.89 yesterday.
Mr Dalby, who is not a shareholder, would not speculate on which way the vote would turn. But said he was concerned that TPG's culture was "very different" to iiNet's.
"Good luck to them and God bless, but their approach is super low-cost, limited service and a silent no-engagement," he said. "It is not a culture I subscribe to.
"But it may be that new ownership will mean some changes, for financial reasons. The proof of the pudding will be in the eating."
Going head-to- head against Telstra, with the sort of funding they are getting from the NBN puts . . . iiNet on the back foot.
