Telcoinabox brokers ISP consolidation

 

Death of the standalone ISP?

Telecommunications wholesaler Telcoinabox has claimed success in brokering the sale or merger of about ten small Australian internet service providers over the past year as the market consolidates.

While the industry's top five players have continued to subsume those with sizable customer bases, consolidation among those with less than 2000 subscribers has also occurred at a quickening pace in the face of competitive prospects under the National Broadband Network and the introduction of small companies with big growth plans.

Telcoinabox last year established a "micro-acquisition strategy" to facilitate the financial or administrative aspects of consolidation for some of its 98 Australian customers.

Those customers represent a total end-user base of approximately 50,000 customers.

Since then, co-founder and chief technology officer Damian Kay told iTnews the company had facilitated approximately one acquisition or merger per month.

"We're getting a lot of [customers] approach us and speaking to a lot of them who either want to get out through a sell to one of our other service providers... or they say 'I want to continue doing this' because it's a part of their overall business," he said.

"We're a bit of a broker, I guess."

The strategy involves connecting the managing directors of telcos willing to merge or sell out, providing administrative help where required to complete the transactions, and occasionally offering commercial loans.

Kay said Telcoinabox carefully considered which customers it would aid in consolidation, but said the company tended to win the loyalty of customers who took part in the strategy.

"We're able to lock them in for a longer term because if we're going to help leverage a larger base, obviously we'll expect something in return," he said.

It is believed Melbourne-based provider IF Telecom has taken up Telcoinabox's offer on more than one occasion in a bid to garner more than 10,000 customers in coming years.

Managing director Andrew Branson did not answer calls at time of writing.

Telcoinabox's strategy is symptomatic of an industry-wide shift towards consolidation.

According to a June 2010 survey by the Australian Bureau of Statistics, there were 372 service providers in Australia - dropping from 467 in 2006 and 889 at the beginning of the century.

The bureau's most recent statistics show that the number of providers with more than 1000 subscribers has declined to less than 100 in the past year, but service more than 99 percent of all Australian internet subscribers.

Kay said the current round of consolidation marked the death of the "standalone ISP".

"What you'll end up with is a whole lot of big guys and a whole lot of small guys, but those small guys will use big aggregators like ourselves," he said.

"The standalone ISP now that isn't using an aggregator or is big enough to go to a carrier, those days are pretty much over. There's probably 100 of them out there that are still standalone and have 200, 300 or 400 customers but that's about it."

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Telcoinabox brokers ISP consolidation
 
 
 
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