By Lucy Battersby
UPDATE iiNet will keep expanding it copper-based broadband networks around Australia even though the NBN is under construction and will replace this technology with new fibre-optic cables over the next decade.
Chief executive Michael Malone said iiNet would expand into certain areas depending on NBN Co’s roll-out plans.
‘‘[Without] a clear plan for where NBN Co is going and on what dates, we are just going to work on the basis that wherever we have sufficient number of customers and access to backhaul, we will be lighting up [networks],’’ he said.
iiNet installed its own equipment in about 35 Telstra exchanges over the past year. Installing its own equipment allows iiNet to connect a customer’s telephone line directly into its network, and offer what is known as naked-DSL, rather than purchasing wholesale broadband services off Telstra.
It takes about two years to recoup the cost of installing iiNet equipment inside a Telstra exchange, he explained.
Simon Hackett, who owned the Internode business which iiNet purchased in December for $105 million, has been in charge of merging the iiNet and Internode infrastructure. He said iiNet would keep expanding its copper-based network even up to ‘‘eight years from now’’ as long as it the business case stacked up.
Mr Malone added that a government-funded pan-Australia internet cable had reduced the cost of moving customer traffic from a local exchange to iiNet’s own data centre, a process known as backhaul. iiNet recently launched services in Darwin and regional Queensland and this was only possible a new cable was recently laid in those areas, he added.
iiNet announced a 17 per cent increase on net profits in the six months to December 31, of $14.4 million up from $12.3 million in the same period in 2010-11.
This would have been $16 million but for an ongoing copyright case between iiNet and representatives of Hollywood studios, which is awaiting a High Court decision.
iiNet recently purchased Canberra's Transact Network and Adelaide-based Internode, which has nationwide customers. iiNet gained 40,000 from Transact and 190,000 customers from Internode. Internode had a market share of 9 per cent in 2010.
Its $365 million revenue came from $356 million in service fees and $8 million from hardware sales, such as the BoB phone-modem. It also earned $517,000 from bank interest.
iiNet’s biggest cost was network and carrier costs — $221 million — followed by employee expenses, which decreased by $200,000 to $41.5 million. Its administration expenses increased to $22 million because of significant acquisition costs and legal fees for a copyright case currently awaiting a High Court decision. So far iiNet has spent $6.8 million on legal fees relating to this case.
iiNet announced a fully franked interim dividend of 6 cents payable on April 19, up from 5 cents in the same period last year. Shares closed 5¢ higher at $3.17.
Management would not give profit guidance for the full year or a dividend forecast. However it did expect to get an extra $20 million in pre-tax earnings from its new TransACT and Internode customers.
Mr Malone said iiNet was unlikely to make any new acquisitions in coming months, although it has about $65 million of debt available to use if needed.
‘‘I wouldn’t forsee any substantial acquisitions in the very short term because we have a lot of work to do with the integration of Internode and TransACT and we are still consuming AAPT. Operationally, we have got our hands full for the next few months. But if the right deal come along we have the headroom and the cash flow to be able to support it,’’ he said.