TransACT to help iiNet take on Govt, business markets

iiNet’s acquisition of TransACT will provide inroads into the business and government sectors for the largely consumer-focused ISP, according to managing director Michael Malone.

Providing insight into the acquisition at iiNet’s AGM today, Malone said TransACT, with revenues of $80m and $17m of EBITDA for FY11, would complement iiNet focus on the consumer market.

“I think we can bring some value in terms of our retail experience — getting more households to connect onto the TransACT network,” he said. “I’m very positive about [TransACT chief Ivan Slavich] and his team’s being able to bring us some experience in corporate and government. That is not an area we have traditionally been as strong in.

“We are certainly throwing more resources at it,” Malone, said referring to iiNet’s Greg Bader who was moved from CTO to head iiNet business division a couple months ago.

Malone said iiNet’s business division had done $57m in revenue against an overall revenue of $700m.

“I still tend to think of us as a retail [business],” he said. “$57m is a lot of money but it is eight per cent of our business. That said it is a growing chunck of our business, and with Ivan and the team bringing in $30m in government and corporate it is meaningful and something we intend to grow upon.”

Malone said iiNet would derive synergies from the acquisition, however as TransACT’s customers were effectively already on-net — on TransACT’s own network instead of Telstra’s wholesale network— there would be minimal cost savings from moving customers across to iiNet’s own network.

He said iiNet typically saved between 15-2- per customer per month in moving a customer on-net.

“In TransACT… we believe there is upside in the head office systems,” he said. “Because TransACT was owned by ActewAGL it relied on its head office systems. In order to prepare [the company] for sale Ivan has outsourced a lot of that to the point where we are paying about $3m in outsourced costs for IT systems. We think we can roll a lot of that back in house onto iiNet’s head office systems as save a good chunk of that.”

Commenting on iiNet’s earlier acquisition of AAPT’s consumer business, Malone said the company had during the past year, managed to effect a major turn-around in customer satisfaction and stabilise customer churn. The company uses the Net Promoter Score (NPS) as its customer satisfaction barometer.

As at October 2010 AAPT’s consumer division’s NPS was ranked at minus 14. As at October 2011 it was ranked at plus 32. Complaints to the Telecommunications Industry Ombudsman numbered about 300 for the division as at October 2010 and diminished to less than 100 as at September 2011.

“In the first year most of our focus has been on trying to improve the network quality and improve the call centre performance – it has been in the consumer perception of the business – and now we can start to actually cut costs out of the business,” he said.

Malone also said iiNet had placed major emphasis on achieving a high NPS from its customers to the point where most staff at the company were either directly or indirectly remunerated based on achieving NPS targets.