Rants, Raves, Reviews


Oh iiNet where has the money gone

By Gary R, in , posted: 15-May-2006 08:35

iiNet is still suspended from trading on the ASX. The company released a statement to the ASX late last week stating that they expect to be back up and trading within 1 to 2 weeks. Additionally there has been a bit of a shake-up with Chairman Peter Harley being appointed to the role of 'Executive Chairman'. Mr Harley is an accountant by trade which sounds like a useful skill given their current accounting bungle.
Rumours abound that iiNet will be announcing slashed, full-year earnings (EBIT) of $30M rather than the anticipated $40M. 25% is quite a difference and you have to wonder where the other 10mil went. They either had it or they didn't to start with, if you have it you count it and if you don't have it, well you don't count it. Simple really. So, with A$30M earnings derived from 650,000 customers in Aus and 100,000 in NZ they effectively earned $40 p/customer. Hardly a stellar, profitable business this whole unbundled broadband game.
Obviously a couple of things could happen now as well. iiNet shares will be hammered. If you were an investor you would be waiting to dump them as soon as iiNet are back up on the ASX, why hang around? If the shares get hammered iiNet will of course become a take over target. You can just see it now the vultures will be circling.
This is all or course relevant because iiNet own ihug and ihug have been vocal about the need for ULL in NZ. Mr Cunliffe has held ihug up as a shining example of the sort of company that will invest in DSLAM's to offer direct broadband services to NZ'ers at competitive prices. Well, you have to ask what Mr Cunliffe was thinking. It is all very well talking the talk but if the ihug parent doesn't have a bean where is the promised 'ihug $20M investment' going to come from? Seriously minister there is a little thing in business called 'due diligence' and it might have been prudent to have requested proof (financials, bank statement, bank loan agreement, etc) from ihug first before including them in your little bucket of potential invest able funds.


Other related posts:
The Butler and Butler 5 Point Plan
National to invest in broadband
We Blew our cap again








Comment by Paul Bennett, on 16-May-2006 20:27

Hello, You quote in your article "if the ihug parent doesn't have a bean" ignores the fact that iinet had full-year earnings (EBIT) of $30M. Still not too bad for a company who have invested substantially in DSLAMs. I have been with iinet for over a year and haven't had any problems. Just how big is big enough? Maybe Mick Malone is quite happy to be earning $30M it's just his shareholders being greedy. I suppose the investement may now dry up and the company be sold off. Especially if Peter Harley can make a lot of money out of the deal. Mick Malone won't do too badly either, I suspect, and he deserves every penny as he had the vision to start the company and drive it to where it's at today. Nowhere near as bad as the One Tel debacle of a few years ago.


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Gary R
Wellington
New Zealand


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