Vodafone buys ihug for $41 million

Mobile provider likely to launch 'ZuHause' style service in New Zealand

Despite frequent denials that it was interested, Vodafone has purchased national internet provider ihug. Vodafone paid iiNet $41 million for ihug, Australian stock exchange documents show, or some $6 million over the book value of the provider.

CEO Russell Stanners, says the purchase is a "perfect fit" for Vodafone.

“Right now, we are the leaders in mobile, however we only have 20% share of the telecommunications market. When combined with ihug’s strength in fixed line broadband and calling, we can develop and deliver even more compelling propositions for our customers.”

The mobile operator has embarked on a strategy globally of becoming a fixed-line broadband provider, and the ihug acquisition follows that policy. In Europe, Vodafone has launched services like the ZuHause one in Germany, which use both fixed and mobile telecommunications.

It is expected that Vodafone will launch a similar service in New Zealand. Recently, Vodafone applied with the Commerce Commission to exchange local calls with Telecom at no cost, and won. The new services may be in place as soon as next year, and represent a threat to Telecom's local loop monopoly.

Although Vodafone has been taciturn on the matter, Computerworldunderstands that it has pursued several ISPs such as Maxnet and Orcon to buy them. The ihug purchase comes as no surprise to industry observers, despite rumours that BCL was an interested suitor.

The sale is expected to be completed within two weeks. At this stage, Vodafone will keep all the ihug staff employed and run the company as a stand alone business.

“Ihug already has a strong brand in the ISP broadband market which New Zealanders identify with, a capable management team and we fully support their growth plans.”