Adam Internet rejected buyout proposals before Telstra offer
- 24 October, 2012 12:37
Adam Internet resisted acquisition offers for nearly a decade before agreeing to a deal from Telstra, Adam Internet executive chairman, Greg Hicks, said on a conference call this morning with reporters.
“I’ve had offers on the table from pretty well every suitor for the last five [to] 10 years,” said Hicks, who declined to say whether he had an offer from iiNet. He considered the Telstra deal “over the last six months” and “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.”
What finally convinced Hicks to accept Telstra’s offer was “the value add in being able to ... leverage Telstra, basically,” he said.
“There’s a lot of products there over the next few years that I think could add a lot of value to our brand.”
Telstra sees “some parts of the market where other smaller, more nimble operators can be more successful,” Kate McKenzie, a director with Telstra, said on the call.
Telstra saw Adam Internet as a “very strong brand” with good customer service and a strong hold on the “value-conscious part of the market” in the Adelaide area, she said. Adam Internet has nearly 100,000 customers in South Australia.
The deal does not mean Telstra will get additional payments from NBN Co for transferring those customers to the NBN, she said.
Undercutting rivals’ prices was not enough for Adam to keep going on its own, Hicks said. He described Adam Internet as a “middle-of-the-road brand.” Others offer cheaper Internet services but the company has seen success based on word of mouth, he said.
McKenzie stressed that Adam would retain some degree of independence. “Adam’s going to continue to operate and make its own commercial decisions about what product it’s going to put together and what prices it’s going to offer out there in the market.”
“Adam is still going to stand alone. It’s not a mini Telstra,” Hicks said. “Everything stays as it is.” That includes the company’s search network and the gaming network Adam shares with iiNet, he said. No employees will lose their jobs, he said. “We’re going to need every one of them, and if we’re going to expand, we’re going to need more.”
The deal doesn’t mean Telstra is shifting to an acquisition-only strategy, McKenzie said. “This is a complementary strategy. Of course we will continue to work hard to make sure we’ve got good value and great products and services that we’re offering to our core Telstra customers, and also that we’ve got some alternative propositions for customers that are looking for something different.”
“The nature of competition is changing in the industry, no doubt about that,” McKenzie said. “I think we’re going to see all sorts of differently constituted new entrants.”
McKenzie said she couldn’t predict how long it will take to secure ACCC approval, but said she hopes it won’t take an “inordinate amount of time.”
She declined to confirm media reports pegging the deal at worth $50 million. “We’re not going to discuss details of commercial arrangements,” McKenzie said.
Internode announced a “major new sales campaign” in South Australia only a few hours after the Telstra/Adam deal was revealed. Internode, which itself was recently acquired by iiNet, said it would offer free setup and three months free broadband to new customers who choose a 200GB or higher plan and bundle it with phone service for two years.
Internode founder Simon Hackett said the campaign “simply offers a great new incentive for customers of other providers in our home market to make the switch.”
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