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TPG Telecom chief executive David Teoh insists he is willing to meet iiNet founder and former boss Michael Malone to alleviate his deep-seated concerns about the $1.4 billion takeover of the Perth-based internet service provider.
iiNet's board has faced harsh criticism from shareholders, with the loudest voice being Mr Malone, around the lack of communications the company has had with them since TPG launched a $8.60 per share bid on March 13.
In a rare interview following TPG's financial results, Mr Teoh said he was more than happy to meet Mr Malone, who now holds just 2.5 per cent of iiNet shares, and talk through the issues he had expressed over the last few days.
"I am very happy to speak to him and have coffee, I do not have any problem with that," Mr Teoh told BusinessDay.
Mr Teoh acknowledged that iiNet's success was built on strong customer service and had a different market segment to TPG.
"When you look at iiNet, its strong branding is created by the good people, the good team at iiNet and we cannot destroy that. We need that good team of people in place," Mr Teoh said.
"The Cape Town call centre, they have fabulous people. I think it would be a good alternate site for TPG as well."
On Monday, Mr Malone launched a scathing attack on iiNet's board for a lack of communication with shareholders following the bid from TPG being made public. His anger was directed largely at iiNet's board of directors and not the executive team or TPG.
Mr Malone had initially supported the offer, but after talking with his family and little communication from iiNet reversed his position.
TPG chief financial officer Stephen Banfield said the company would, over the coming weeks, get in touch with iiNet stakeholders.
"We are disappointed with the reaction of certain shareholders because we genuinely believe this is a very compelling offer for iiNet shareholders," Mr Banfield said.
Morgans Financial senior analyst Nick Harris said TPG was doing a lot on customer service because it should lower churn and consequently improve profitability.
"I personally think that TPG are very smart business operators. With that in mind, I think they'd be crazy to try and move iiNet call centres....and have issues with customer service because it's going to destroy the value of the business they're looking for," he said.
iiNet offers 24-hour support with call centres in Australia, New Zealand and South Africa. TPG has moved some of its call centres to Manila, Philippines.
"iiNet customers are quite colloquial, they're strong net promoters of the brand and customer service. It's a different type of customer, it's not the same as a TPG value-based customer and TPG know that."
In comes as TPG reported its first-half financial results, beating analyst expectations and upgrading earnings guidance for the full-year.
The Sydney-based internet service provider now expects earnings before interest, tax, depreciation and amortisation to come in between $480 million and $483 million, up from previous guidance of between $455 million and $460 million.
The company reported an 18 per cent jump in net profit for the first half to $106.7 million, up from $90.1 million in the prior corresponding period.
Revenue surged 59 per cent from $394.6 million to $627.3 million. Much of the revenue increase was thanks to the acquisition of AAPT and further organic growth.
TPG shares closed up 3.5 per cent at $9.14 on Tuesday, while iiNet shares slipped 2.2 per cent to $8.66.
TPG increased its interim dividend from 4.5¢ in the first half last financial year to 5.5¢. The dividend is payable on May 19.
As of January 31, TPG had 786,000 broadband subscribers and 342,000 mobile subscribers. Of the additional 38,000 broadband subscribers added in the half, 17,000 were NBN and fibre-to-the-basement, while 21,000 were ADSL.
TPG is pressing ahead with its plans to build a NBN rivalling fibre-to-the-basement (FTTB) network to 500,000 apartments in metropolitan areas, Mr Teoh said, however, it is moving slowly and was impacted by having to stop sales of the product because of a change in government regulation forcing it to create wholesale plans for other ISPs.
"FTTB presents a huge opportunity for the company over the longer term and we think that the rollout, if they do continue to roll it out, will generate really strong returns on that part of the business," Wilson Asset Management chief investment officer Chris Stott said.
