Telstra has made a play for South Australian ISP Adam Internet in a deal rumoured to be worth about $50 million.
The carrier this morning confirmed a report by AdelaideNow that it is is trying to buy the entire Adam business, including its data centre and fibre assets.
The report priced the deal at about $50 million, although both Telstra and Adam Internet declined to comment on "commercial details".
The proposed buyout is subject to approval from the Australian Competition and Consumer Commission.
Telstra's group managing director of innovation, products and marketing, Kate McKenzie, said it would retain the Adam brand "and run the company as a stand-alone subsidiary".
Although the business came with a "sub-100,000" customer base, McKenzie made it clear that was but one of a mix of assets that drew Telstra to table a buyout offer.
"We're not buying a customer base," she said.
"We're buying a whole business here with a data centre and all sorts of other assets, which we think are quite an interesting combination of things that have got opportunities for expansion in the future".
Telstra is looking at maintaining Adam as part of a future "multi-brand" strategy for the broadband market, revealing plans to expand Adam outside of South Australia for the first time.
"We'll support the South Australia broadband business in a national expansion over a period of time," McKenzie said.
"I think [part of] our motivation for buying Adam Internet is we think its looking after a value-conscious part of the market, which it's serving very well. We think there's good opportunity for growth potential."
Adam Internet's founder Greg Hicks played down the potential operational impact of becoming an alternative brand under the Telstra umbrella.
"Adam is still going to operate standalone — it's not a mini-Telstra," he said. "My understanding is that it's business as usual and customers will see no different."
Hicks said that Adam Internet customers could "continue to contact us in the normal way".
Decisions on what Telstra might do with Adam's other assets, such as its WiMAX network and data centre, would be taken if the acquisition receives regulatory approval, and in consultation with Adam's executive team.
Hicks would be employed as a consultant "following the completion of the sale".
Employment arrangements at the ISP also weren't expected to change under the proposed new ownership.
Several offers
Hicks said he had fielded buyout offers for Adam "from pretty well every suitor" in the past five to ten years.
He said the Telstra deal had been looked at "over the last six months".
"Until the weekend I hadn't fully decided that the deal that was on the table was going to a) show a future for Adam and b) a security for the staff," he said.
Hicks declined to comment on whether or not he had weighed up a competitive offer from iiNet. "I'd prefer not to talk about that," he said.
He said the ability to leverage Telstra's scale to grow Adam's presence was a key factor in his decision to sell to Telstra.
Path to consolidation
If approved, Telstra's purchase of Adam will become the latest in a string of buyouts that have led to considerable consolidation in the ISP sector.
iTnews reported in April last year that ISPs were attempting to build a critical mass of DSL tails in order to compete in an NBN world.
iiNet has expanded substantially through acquisition, buying TransACT for $60 million and Internode for $105 million late last year.
There has also been consolidation among smaller players, with EFTel and Telcoinabox making and brokering sales respectively.
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