Ihug poised to buy e-comm business

Ihug is looking to acquire 'a high profit-making e-commerce company' as part of its aggressive new growth strategy.

Ihug is looking to acquire "a high profit-making e-commerce company" as part of its aggressive new growth strategy.

Ihug marketing director Tim Wood says the company has a particular target in mind and is "very likely" to make an acquisition.

As it waits for its proposed merger with Force Corporation - to create a new entity called Ihug Limited - to be approved by Force shareholders, the Auckland-based ISP is making both internal and external changes to its business to gear up for its new identity as a listed company.

Strategically, the key aim for this year is to ramp up customer numbers.

"More customers means more products sold, greater revenues, greater stability, better share price," says Wood.

Last week, Ihug took controlling stakes in two Australian ISPs; the Woollongong-based One Earth and Adelaide-based InterWeb, which will add 4000 and 5000 customers to Ihug's total respectively, and will, in the case of Interweb, open up a potential market of a million customers in and around Adelaide.

Both ISPs will sell Ihug's high-speed direct-from-satellite Satnet service and also provide distance phone calling based on non-coded access.

"They were attractive because they're in the rural sector, which is a great place to sell Satnet," says Wood. "The competition in the cable market is reasonably fierce in the Australian CBDs, but the rural market in Australia is pretty large. There are big tracts of land that nobody's going to cable. Both of those companies also represent points of presence (POPs) that we didn't have before."

Ihug, which now has around 110,000 customers, will also be looking to grow its subscriber base in New Zealand, "either through advertising or acquisitions, whichever comes first", says Wood. He is declining to comment on what ISPs, if any, might be acquisition candidates.

As well as the Internet access and phone services, the New Zealand market will be offered Ihug Digital TV, which the company bundles with the terrestrial version of Satnet. Acknowledging past problems with Satnet, Ihug has reorganised that part of its business, removing it from the Ihug Business division.

"We're actually making some major changes inside the business," says Wood. "We've got a dedicated team on Satnet now. We had problems where we ran out of cards and others didn't work very well. But we've set up an action team which is responsible for making sure the product is perfect."

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