Telstra buys Adam Internet in surprise agreement

Telsta has purchased Adam Internet, the last independent ISP of South Australia, the telco confirmed this morning. The surprise deal is subject to approval by the Australian Competition and Consumer Commission (ACCC).

Telstra hasn’t yet confirmed the price of the deal, but media reports have pegged the deal at $50 million.

Telstra said it entered an agreement to acquire the smaller ISP and will “support the South Australian broadband business expand nationally.”

Telstra said the acquisition fits into its growth strategy.

“Adam is a respected brand with a loyal customer base in South Australia,” said Kate McKenzie, a Telstra director.

“It’s a great online, low cost business that lets customers purchase and manage their own services. This model offers opportunities for growth, particularly for consumers wanting online sales and support.”

Telstra plans to keep the Adam brand and run the company as a stand-alone subsidiary. Adam’s executive chairman, Greg Hicks, will stay with the company as a consultant after the sale is complete, it said. Telstra doesn’t plan to cut any jobs at Adam as result of the deal.

Hicks said in a statement that the agreement “will help cement a strong future for the Adam brand, our people, and our customers and represent the next stage of Adam’s growth.”

“The outcome of this transaction for Adam’s existing customers is simple—Adam will continue to provide excellent value-for-money broadband that doesn’t compromise on service,” Hicks said. “The message for potential new customers is that, with Telstra behind it, Adam will be expanding nationally. We’ve built a great business with a great team running it and we’ve got a bright future.”

The deal surprised at least one industry analyst.

“It is as far as I know for the first time that Telstra buys a local ISP,” BuddeComm analyst Paul Budde told Computerworld Australia. “It is a bit puzzling as it is hard to see what Adam Internet actually brings to the party other than its customers.”

“In the overall scheme this of course makes total sense as telecoms has become a commodity, margins are thin and you can only survive on volumes, so in the end there will only be a handful of ISPs/telcos in the country,” Budde said. “If Internode was too small to survive on its own Adam Internet most certainly is too.”

“But perhaps far more interesting is the fact that Telstra has become active in industry consolidation,” he added.

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