Pipe acquisition shakes up Australian capacity market

Australian wholesale carrier Pipe Networks is to be acquired by ISP SP Telemedia in a  A$373 million (€231m) transaction.
 
The founders Bevan Slattery and Stephen Baxter, who launched the start-up in 2002 stand to share A$101 million as part of the deal.
 
Pipe owns Australia’s third largest metropolitan fiber network and last month completed the building of the PPC-1 cable, linking Sydney to Guam.
 
The move has attracted some controversy as Pipe moves from being positioned as a rogue independent provider of peer-to-peer networks and competitive international bandwidth capacity to being part of the established market.
 
Slattery has acknowledged the potential for a perceived industry backlash and is understood to be talking with clients, customers and partners over the next few weeks to discuss the reasons behind the sale.
 
Slattery, who will remain CEO, said the new Pipe would have more wholesale products and it is anticipated that there will be no change in management or staff.
 
Under the deal ASX listed SP Telemedia will pay A$6.30 a share for Pipe, which has been trading around the $6-a-share level for most of the last three months.
 
SP Telemedia chairman David Teoh said, “PPC-1 gives us a competitive advantage with access to international bandwidth, allowing us to offer highly attractive products to both existing and new customers. We expect synergies to flow by bringing more SPT customers ‘on-net', as well as enhancing our corporate offering and delivering exciting new products to our customers.”
 
The cable, which was built in conjunction with Tyco, has capacity of 2.56 Tbps, providing diversity in the region in addition to onward connectivity to Asia and the United States.

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