M2 pledges to keep iiNet brand alive

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M2 pledges to keep iiNet brand alive

Battle for ISP begins.

M2 CEO Geoff Horth has promised to maintain the iiNet brand as a standalone operation and preserve its much-touted customer advocacy should its $1.6 billion offer for the company be accepted.

The ISP today made a play for its rival following TPG's March all-cash offer to take over iiNet for $1.4 billion.

In its own offer, made public today, M2 took heed of shareholder concerns about the future of iiNet's customer service and advocacy should the offer from low-cost operator TPG be accepted.

M2 took pains to emphasise that it would maintain iiNet in the event the two businesses merged, highlighting its proposal for two iiNet directors to join the M2 board as evidence of its plans.

It also pointed to its acquisitions of Primus and Dodo as examples of the company's ability to maintain individual brands.

M2 CEO Geoff Horth said in an investor call this morning that the offer of board spots for the iiNet directors should give shareholders comfort that M2 has a "very clear intent" for its proposed acquisition.

"We have made committments in our offer that we would maintain the iiNet brand, and dedicated sales and service organisations for that brand, in much the same way we have done with the Dodo and Primus acquisitions," Horth said.

"We don't need to disrupt any of the operations of the businesses that are customer-facing. There should be comfort that the integration risks with this business will be quite low."

Horth said M2 has had an interest in iiNet for some time.

Following TPG's bid in March, and once M2 announced its acquisition of NZ ISP CallPlus two weeks ago, the company made its initial approach to the iiNet board.

Horth said the ISPs had very similar business models, and both had proven they were capable of "integrating assets and extracting synergies".

"We both play that value-added service provider role. We've both been quite disruptive and done a number of significant acquisitions, we almost have that united nations of people coming together," he said.

"We both have very similar philosophies. [We plan to] work very hard to preserve the iiNet brand, passion of its people and customer advocacy as part of this."

M2 was one of a number of ISPs fighting alongside iiNet to block the owners of the film Dallas Buyers Club from accessing the personal details of customers alleged to have shared the film online without paying.

"The fact that iiNet and M2 were parties to that action [should signal] that we will absolutely continue to ensure our customers' interests are protected," Horth said.

He said M2 looked at iiNet's net promoter score and customer service experience with a "degree of envy".

"We absolutely think we can learn some things from the iiNet team around how to approach that."

In its offer, M2 said it believed it could achieve EBITDA synergies of $60 million annually by merging the two businesses.

But the synergies didn't mean M2 would need to make any significant changes to the customer-facing elements of the iiNet business, Horth said.

Customers and shareholders - including founder and former CEO Michael Malone - have raised concerns about the future of iiNet under TPG rule.

The iiNet board also recently admitted that it had "serious concerns" about the preservation of iiNet's customer advocacy and service levels should the TPG deal go through.

"We are all hand on our heart seriously concerned that on the basis this deal proceeds, [it needs] to remain great for staff and customers," iiNet chairman Michael Smith said last month.

"I can't pretend we aren't seriously concerned about it.

But TPG was "paying a large premium to acquire [iiNet's] special value", Smith said.

"They're not going to run it into the ground. I just can't see how [TPG CEO David Teoh] could get value out of that very large number - $1.4 billion - without doing all he can to preserve that."

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