Mitchell Bingemann | August 19, 2008
GOING naked has helped Australia's third-largest internet service provider, iiNet, to post a $19.9 million profit for the 2008 financial year.
Managing director Michael Malone said "unexpected" growth in take-up of the internet service provider's "naked" DSL broadband offering drove revenue up 9 per cent to $251.2 million. Since launching its naked DSL offering in December, iiNet has accumulated more than 30,000 naked DSL customers at a growth rate of more than 1000 a month, Mr Malone said.
"Naked has been a runaway success for us," he said. "It has been the major driver of growth, and has far exceeded what we expected.
"It's a great product from our point of view because it's very difficult for the large carriers to respond, as it directly affects their PSTN revenues."
As of June 2008, iiNet had 373,482 DSL broadband subscribers, including more than 140,000 it picked up with its recent acquisition of Perth internet service provider Westnet.
In total, iiNet now has 479,163 internet subscribers, including dial-up and satellite users.
The company expects to lift its revenue to more than $400 million over the next financial year on the back of more customer growth, and as it consolidates Westnet as the regional arm of its business.
"Westnet will continue to operate as an independent business," Mr Malone said.
"With the acquisition now complete we expect it achieve $2.5 million in synergies over the next financial year." The period also brought increased capital expenditure from iiNet, with an infrastructure investment of $23 million this financial year, up on $17.3 million last year.
Mr Malone played down industry concerns that investment in telecommunications infrastructure would slow down as the federal Government prepared to appoint a builder for its national broadband network.
"We can't afford to hold back investment in infrastructure," he said.
"It's going to be at least a year before a decision is made on the national network and the Government doesn't want a capital expenditure freeze for three to five years.
"The only way telcos can operate at the moment is by assuming the status quo and then dealing with the changes as they arrive." Mr Malone ruled out a total investment freeze, but he did suggest it would start to slow over the coming year.
"Realistically, by the time the NBN comes and starts being built, most of the transition growth from dial-up to broadband will be done," he said.
"At that point the major differentiator will be deliverable product, service and brand perception."
To counter the slowdown in growth, Mr Malone said iiNet planned to expand the service provider's content offerings and to increase its investment in telephony. "As boring as it sounds, I like telephony. The telephony market still outstrips data 10 to one - voice over internet protocol is a big growth area for us at the moment."