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iiNet CFO David Buckingham and CEO Michael Malone. Picture: Ian Munro.
The West Australian iiNet CFO David Buckingham and CEO Michael Malone. Picture: Ian Munro.

Michael Malone's parents' garage in Padbury is still part of the iiNet induction program.

Budding new employees of the internet services provider are taken on a tour of the modest digs from where, in 1993 with just $25,000 (half borrowed from his parents), Mr Malone and his mate Michael O'Reilly started what is now an $800 million success story.

As the company prepares to unveil its financial results tomorrow, Mr Malone says the key to iiNet's success is retaining its innovative roots, as opposed to the big "utility"-scale telcos, and keeping its customers front and centre.

"We don't see ourselves becoming like a utility, we see ourselves becoming like an Apple," Mr Malone said.

"We are a consumer brand."

The comment has shades of the company's almost cult-like mantra "lead on product, differentiate on service". Despite some doubters, such as other listed WA tech stocks, it has been a stellar year for iiNet. Its shares are up about 60 per cent to $4.88.

The company's smaller WA peer Amcom Telecommunications last week posted an underlying $10 million net profit for the first half - a 20 per cent increase on the previous corresponding period.

The latest results allowed Amcom to renew its forecast of 20 per cent growth in annual earnings - smashing many analysts' forecasts and dispelling notions that share prices in the sector have run ahead of future earnings growth potential.

Mr Malone argues that the analysts have got it wrong - there are plenty of growth opportunities for iiNet, which is now Australia's second biggest DSL internet provider.

"We have more than $200 million per year of revenue in B2B (business to business)," Mr Malone said.

"That was something we only started in 2007, and is largely leveraging off the strength of the brand. Our catchline used to be if you don't have an IT manager, we want to be your IT manager - just taking care of stuff the local travel agent couldn't do."

With competitors such as Optus defining a small and medium business with less than 1000 staff, Mr Malone argues there is a huge gap in being able to service the small end of town, even potentially government agencies, which is a fiercely contested market.

Chief financial officer David Buckingham adds that mobile services offer another piece of low-hanging fruit for iiNet, building on its existing customers. "We're still proudly of the view that we are undervalued relative to the other telcos," Mr Buckingham said.

"We have just had a phenomenal reaction to our launch of mobile last year, and we are now well over 100,000 subscribers (from nothing two years ago)."

Even if it is reselling Optus mobile spectrum, the margins are an easy boost to iiNet's bottom line, in a nation that on latest figures boasts 22.1 million mobile internet subscriptions versus a population of 22.9 million - effectively one for every man, woman and child in Australia.

Then there's the National Broadband Network.

Some analysts argue the NBN will turn ISPs into utilities, and make advertising crucial to differentiate offerings, putting low-cost providers such as TPG in the box seat - and perhaps forcing mergers.

But Mr Malone and Mr Buckingham counter that in regional areas Telstra's costs, for example, will rise, because it must shut its existing copper network, giving iiNet an opportunity to build on its solid customer base in the areas that Optus has effectively abandoned.

Proof of this, perhaps, was iiNet's three-year deal to hook up the Tasmanian police to the NBN last month.

With the runs on the board, but the business maturing, some have speculated that WA's most successful internet entrepreneur is preparing to hand over the reigns.

But the hands-on Mr Malone is having none of it.

"I am an operator," he said. "I have been since we set up 20 years ago. The entrepreneurial part was done before we listed. I love being in the business."

We're still proudly of the view that we are undervalued relative to the other telcos. "David Buckingham