Telstra snaps up South Australian ISP for $50 million

Telstra has acquired the internet service provider Adam Internet for a reported $50 million and will expand the South Australian business nationally.

The deal is subject to approval by the Australian Competition and Consumer Commission and will see Telstra acquire all of Adam’s business including Adam’s Adelaide data centre and fibre assets.

The telco giant will retain the Adam brand and run the company as a stand-alone subsidiary of Telstra.

Telstra did not disclose the purchase price but Adelaide Now reports the price paid is over $50 million.

Adam executive chairman Greg Hicks had previously dismissed rumours of the deal as “total bullshit” but said today in a statement that Adam and Telstra’s shared customer service philosophy was key.

“This agreement will help cement a strong future for the Adam brand, our people, and our customers and represent the next stage of Adam’s growth,” he said

“The outcome of this transaction for Adam’s existing customers is simple – Adam will continue to provide excellent value-for-money broadband that doesn’t compromise on service.”

Hicks will be retained as a consultant following the completion of the sale and Telstra said existing employment arrangements for current staff would not be impacted by completion of the sale.

Telstra’s innovation products and marketing group managing director, Kate McKenzie, said the acquisition aligned with Telstra’s strategic priorities to retain and grow customers and build new growth businesses.

“Adam is a respected brand with a loyal customer base in South Australia,” she said.

“It’s a great online, low-cost business that lets customers purchase and manage their own services.”

McKenzie said the Adam model offered opportunities for growth, particularly for consumers wanting online sales and support.

“Customers trust the Adam brand and we’ll certainly be keeping it as we work towards further growth under Adam’s first-class management team,” she said.

The acquisition by Telstra follows iiNet’s purchase of Internode for $105 million late last year.

Ovum research director and telco analyst David Kennedy told SmartCompany consolidation is definitely a trend in the industry but up to this point has been led by operators other than Telstra, principally iiNet.

“To be honest, I’m a bit surprised by this deal, Telstra is the largest ISP in the market and Adam in contrast is very small,” he said.

Kennedy said while Adam doesn’t publish its connection numbers, he estimates it has around 50,000 broadband customers: assuming the price for the company was $50 million, which puts the acquisition at around $1,000 a customer; this is in comparison to Internode, which was acquired at around $1,500 a customer.

“There must be something about this that Telstra thinks there is value over and above the customer themselves. It appears it is the business processes and expertise in low-cost service delivery Telstra is interested in,” Kennedy said.

“What we could be seeing here is Telstra setting up a low-cost brand for fixed broadband services.”