Smooth Slattery to soothe ISP concerns on PIPE sale

PIPE Networks chief executive Bevan Slattery will have an interesting night ahead at the company's Sydney Christmas party this evening.

Slattery has much to celebrate - he may have just pulled off a $373 million deal with SP Telemedia that will see his own finances improve by some $50 million.

But he will also be surrounded by business partners - primarily ISPs and data centre operators - that have enjoyed a great working relationship with PIPE Networks based on its perceived independence from vertically-integrated providers.

At last year's Christmas party, Slattery told his customers that PIPE was "there for the little guys". But now he's in the big leagues.

The SP Telemedia sale will create a vertically-integrated provider - a mini-Telstra some have suggested - and ISPs will find themselves buying wholesale connectivity from a competitor.

Slattery told iTnews today that he is more than aware of the perception.

"It is certainly a perceived risk," he said. "I will be sitting down with partners and customers at various functions over the next few weeks to explain the very good reasons we are doing this.

"The one thing I can say, in this circumstance, is that Soul/TPG is making a very serious investment, and it would make no sense for them to then change the PIPE business. It is very important for Soul that PIPE remains as it is today.

"PIPE is likely to have more wholesale products, not less. And I expect no changes in management or staff - its business as usual for PIPE after this."

Slattery is also confident SP Telemedia can come up with the money to pay for the acquisition.

On close inspection, he said SP Telemedia was a "very good business" that "generates an extraordinary amount of cash.

"They will soon have paid off $150 million debt in 18 months [from borrowings for the Soul/TPG merger]," he pointed out.

"When you look at the combined earnings [of SP Telemedia and Pipe Networks], they'll pay for this without much of a problem at all."

PIPE was always for sale?

Slattery said he had received "a couple of approaches" since early 2009 from parties impressed with PIPE's performance during the global credit crunch and its successful launch of the PPC-1 cable.

"One of the issues of being a public company is that you're always for sale, one shareholder at a time," he said.

But Slattery said that selling out was never a "defined outcome."

"The process was to look at all our options," he said, "everything from investments in us to acquisitions."

Slattery said he had never considered breaking up the company during the sales process.

"It always made sense to sell everything together," he said.

Staying on

Slattery has signed a contract to stay on with SP Telemedia for at least twelve months.

iTnews asked whether he needed to work another day in his life, given the deal he just signed.

"Probably not," he said. "But I enjoy this industry - it's an industry I love and am passionate about.

"I certainly have benefited from its support and I want to stay on to ensure [the merger] goes smoothly. It's important for me to be there for staff and clients.

"I sold out once before you know, and I took six months off - it does get a bit boring."