Reaction to Ihug-Force Corp deal mixed

So, Ihug has finally revealed the identity of its mystery suitor - Force Corporation - and the response has been decidedly mixed.

So, Ihug has finally revealed the identity of its mystery suitor - Force Corporation - and the response has been decidedly mixed.

The whiff of insider trading, the same-day sale of 10% of Ihug to Tappenden Holdings (meaning Tappenden stands to snare 6% of the new company at 57 cents a share and not the 85 cents Force share reached the following day) and the involvement of one or two people who earned colourful reputations in the 1980s have all generated a guarded response to the deal.

Indeed, some commentators have been outright hostile. An Ord Minett analyst declared that the real value in the Internet was delivery speed and content - and that Ihug's merger with Force "doesn't give anyone speed, nor much in the way of content."

It's hard to know how to read this, without being an analyst oneself. Because if funds from Force are used to accelerate the rollout of Ihug's digital TV service - into which is built the company's Satnet high-speed Internet product - then the merger will certainly bring speed to customers.

Whether the deal brings Ihug useful content is less clear; its TV service will have a credibility gap until a few thousand more customers are actually using it. But Force's existing licensing relationships with major motion picture producers, the links to Disney of Force shareholder Shamrock Investments, and Force's one-third stake in the country's best independent TV production house, South Pacific Pictures, seem at least to represent a start.

In the past, the Wood family, who, along with Ihug director Bart Kindt, will hold 51% of the new company, have made a trademark of successfully bucking the received wisdom. But they've usually taken longer than promised to perform their miracles - and the question this time is whether they actually have enough time. Not to mention whether the merged company can sell its property assets quickly, and for the right price, in order to plough the cash raised back into growth.

Apart from rolling out infrastructure this year, the new Ihug Limited will be spending money on marketing to drive up customer growth. In a market where only Xtra, with the natural advantage of being owned and operated by the country's incumbent telco, has been able to grow strongly over the past year, that might not be easy.

Rapid customer growth is a goal you set when you either have new plans for your relationship with customers or when you're looking to be bought by a bigger fish in search of instant market share.

Either could be true; but the fact that the Woods are to stay at the helm of their expanded company suggests that they have some ideas to see through. As Nick Wood told Unlimited magazine last year, in response to a question about selling up or staying put:

"If we sold the whole thing we'd be getting out of it, [but] the purpose of selling part of the business is to get something out of it and to raise money to grow the business.

"Selling a piece of your business is always a hard thing. It's probably much easier to sell your business outright - you can just take the money and say bye-bye. But when you're trying to raise money to do things and get people excited and involved … you want to make sure they're on the same wavelength, don't you?"

Join the newsletter!


Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags e-commerce

Show Comments