Tomorrow TPG take over Perth’s (as yet only) billion dollar tech startup, Australia’s #2 internet service provider iiNet, with financial settlement on the deal.
Founded in his Mum’s Padbury garage in 1993, because newly graduated Michael Malone wanted to continue to use the internet post university, the rise of iiNet is testament to Michael’s audacity, vision and hard work, and in latter years, as an example of a company that truly understood (and lived and breathed) that the customer was always at the centre of things.
In the mid and late 1990s, with government-owned Telstra slow to get into national broadband, a whole host of small ISPs were established in Perth. iiNet was quick to soak them up as it grew to its own IPO and beyond. Michael took the company public in 1997, acquiring Wantree, Networks and Net Trek along the way. In the 2000s, a dozen other acquisitions occurred including Malcolm Turnbull’s own Ozemail, and New Zealand’s iHug.
As iiNet grew so it went head to head with Telstra, and then, in 2005/6 a stutter occurred, which was almost terminal. Due to some accounting problem post a recent takeover, results sent to the market were later revised, causing the stock to be suspended for weeks, and a decimation in share price. This brought in new board members and the sale of iHug.
It proved to be a mere misstep, from which the subsequent acquisitions of Up’n’Away, Westnet, Netspace and Internode pushed it past Optus into 2nd place in the residential broadband market in Australia, with only the now privatised Telstra ahead of it.
In 2008, peering from afar was an unlikely foe – the Hollywood movie industry. In attempt to knock off a small fish on the other side of the world, as some test case for further legal action elsewhere, a class action was brought against iiNet by 34 movie and TV companies including the mights of 20th Century Fox, Warner Bros and Village Roadshow. They claimed iiNet should have done more to prevent illegal downloading of movies by its customers, which iiNet argued was akin to blaming road building companies for every car crash. iiNet famously won the case, and two subsequent appeals. Other ISPs around the world breathed a sigh of relief.
After 20 years in charge in 2013/14, Michael took 6 months off to go mountain climbing and respected former Brit and CFO David Buckingham took over in an interim role. When Michael returned, his heart was not really in it, and he left for good in mid 2014, still a major shareholder and no less passionate, but with other things on his mind. He remarried and moved to New South Wales, buying himself a large mansion in the country. He joined a few startups as a board member.
When low cost provider TPG made an offer to iiNet earlier this year Michael was incensed, claiming the board had lost all growth plans for the company and were folding too easily. In a prescient warning, he said the board and TPG were “appalling silent on the impact this would have on our staff and customers.”
Michael had made ‘serving the customer‘ the be all and end all of the company. Everyone, including him, was remunerated on NPS (net promoter score) – a gauge of how evangelical your customers are with your service. iiNet won award after award for this.
A few months later a rival bid came in from M2 which prompted TPG to up their initial offer. In July Michael bowed to the inevitable and 95% of shareholding went along with the deal. He looked saddened (see picture) but also must have felt pride in the final valuation.
2 weeks ago the deal passed its last administrative hurdle, with the ACCC allowing the merger to go ahead. The following week TPG acted swiftly, removing the CEO David Buckingham, and many management reporting lines were changed. An interim board was put in place, which disbands tomorrow. The swiftness of these moves were a shock to many inside, and outside, the company.
Time will tell if the customer-focus essence of iiNet will remain. Many fear that if their well renowned devotion to customers drops away, so may the client base. 600 staff inhabit 502 Hay Street in Subi – how many will be there by Christmas, or the same time next year?
Whatever happens will not diminish the achievements of this son of an Irish fence maker, who built up a billion dollar company from scratch, taking customer calls by his bedside at all hours of the night in that Padbury garage back in the early 90s. Over 20 years this brought him many admirers, amazing experiences and enormous wealth. It’s been quite a ride.
Photo : Philip Gostelow