Exetel will consider acquisition offers

The CEO of internet service provider Exetel, Steve Waddington, says the ISP is open to being acquired if the right offer is made, with the company already receiving expressions of interest from other ISPs.

Waddington told Computerworld Australia the company began an audit of its market worth earlier this year, with the audit expected to be finalised by the end of this year. He said the company will then consider the expressions of interest it has received, which have come “every other month”.

Whether Exetel accepts a takeover offer or not will depend on several factors, Waddington said, such as which company is making the offer and whether it would partner with or completely acquire Exetel.

“After one of the principals of the company passed away earlier in the year [CEO John Linton] … [Annette Linton and I] thought, ‘Look, let’s just find out what the market sees the company value at and then once we’ve got that information we can decide where we go from there’,” he said.

Waddington said assessing Exetel’s market value has taken longer than he hoped due to a change in the company’s reporting requirements to ASIC, which required it to upgrade its accounting systems.

He added that it was impossible to speculate on when a decision might be made on whether Exetel would accept any offers, with timing dependent on what offers are made and how negotiations play out.

Paul Budde, telco analyst, said he was not surprised Exetel would consider acquisition, and that ISPs TPG and iiNet could be interested in buying the company.

"The telco market in Australia will need to consolidate significantly further and smaller companies such as Exetel can’t survive on their own. I also think it is too [late] for them to become a major player and that more likely they will be absorbed by others," he said.

Exetel’s future strategy

Following the death of Exetel’s chief executive, John Linton, in February this year, Waddington, who worked with Linton for 15 years, said the company has spent the past 10 months in a “conservative” phase.

“That’s because we’ve had the need [to] after one of the principals of the company [was] no longer involved, to just have that period of consolidation and stability in our operation. I think we’re getting to the end of that period now,” he said.

The downside of adopting a more conservative approach has been a lack of focus on new and creative approaches to the company, Waddington said.

With the new year just around the corner, he said the company plans to enter a more aggressive phase.

“If we’re not market competitive then we don’t get any business. That’s just normal for what we have to do to operate…” Waddington said.

“The business was driven for eight years by someone with a very different idea of what they wanted to achieve, a very strong personality and very closely involved with all the staff, including myself.”

The ISP market Exetel now competes in has seen several new entrants join the market, but Waddington said the current state of the market is no worse than it was several years ago.

However, Exetel recently responded to market change and increased the price on three older plans to bring them “into line” with current plans.

It also cut the number of its legacy plans (around 480) to around 400, a dozen of which are currently available to the market.

To stay competitive, Exetel also plans to retain its market strategy of providing products to the market at the lowest possible cost, while still delivering a profit to the company.

This is a strategy the company has also adopted for services on the National Broadband Network (NBN). Four per cent of its customer base is on the NBN, and Exetel aims to grow this to around 7 per cent by the middle of next year.

“I guess we’re a bit of a one trick pony in this regard, in that our plan doesn’t change. We try to keep our costs as low as we can, our overheads as low as we can and we put the mark-up on the product that lets us stay in business but not at a price that’s uncompetitive…” he said.

“I think the next calendar year will be a very interesting time indeed.”

Follow Stephanie McDonald on Twitter: @stephmcdonald0

Follow Computerworld Australia on Twitter: @ComputerworldAU

Copyright © 2012 IDG Communications, Inc.

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