iiNet to buy Netspace for $75m?

iiNet has requested a trading halt following speculation that it will acquire fellow internet service provider, Netspace.

iiNet CEO Michael Malone (Credit: iiNet)

iiNet said it requested a trading halt in response to a speculative article in the Australian Financial Review. The newspaper reported that a deal was expected to be made within the coming fortnight. The report speculated that the deal could be worth $60 to $75 million.

The halt was expected to be lifted within two days, after iiNet responds to the speculation.

Netspace was founded in 1992 by chief executive Stuart Marburg and technical director Richard Preen and is not listed on the Australian Stock Exchange. The company claims to have around 80,000 customers, which would, if acquired, leave iiNet with just under 600,000 customers in total — 400,000 short of where its chief Michael Malone said he wants the company to be by the time the NBN Co access is available.

The speculated move also comes after iiNet was bumped from its third largest ISP spot when no-frills ISP TPG announced its intent to acquire Pipe Networks, which recently completed its PPC-1 Sydney to Guam cable, and owns an extensive metropolitan network that services enterprise customers.

At the company's half-year results Malone told ZDNet.com.au that in preparation for the launch of services on NBN Co, its goal was to achieve 15 per cent market share.

"We said we want to get 15 per cent market share. That's approximately 1 million customers. We think we need to get there," he said. "We have to be NBN ready." The ISP, which also owns Westnet, said it was on the lookout for and in the position to make acquisitions this year.

Both Netspace and iiNet were pioneers in the ISP space, which invested in their own DSLAMs at Telstra exchanges. Netspace last year installed a further 10 DSLAMs across Tasmania. iiNet is believed to have just one of its own DSLAMs in Tasmania.