Ihug's forecast: steady, but hardly exciting

By PAUL BRISLEN

Auckland internet provider Ihug has posted pre-tax earnings of A$1.3 million ($1.4 million) but its Perth-based owner says the year ahead will see little growth.

Ihug was bought late last year by Australian internet provider iiNet and managing director Michael Malone had high hopes for the New Zealand market this year. But Malone says the Commerce Commission decision not to open Telecom's network to competitors, and issues surrounding Telecom's proposed wholesale model will hinder growth, particularly in broadband internet access.

Ihug is selling services on both Telecom's network, using a technology called DSL (digital subscriber line) and on Wired Country's fixed wireless network.

"Dial-up access and voice are both stable and DSL is growing slowly but it's not very exciting," said Malone.

"Over here [in Australia] we're spending $9 million rolling out our own DSLAMs and we wanted to do something similar in New Zealand but we just aren't allowed to."

Malone says the Wired Country service is growing faster than expected.

"We thought we'd put on about 100 customers a month but the early signs are very encouraging. We're doing about 200 to 300 a month instead." The only drawback with the Wired Country service was the limited reach of the network, which is available only in parts of Auckland and Hamilton.

Malone said Telecom's decision to halt the introduction of its wholesale service meant the coming year could be one of slow growth for the internet provider.

"The Commerce Commission was dead right to call a halt to the whole thing because all Telecom was doing was treating the providers like resellers. What we want is wholesale access to the line itself to sell whatever services we want."

Telecom has held discussions with the Commission to try to work through its objections to the proposed wholesale service, but neither Telecom nor the Commission will comment on what those issues are or how soon a solution will be produced.

IiNet shares are down 4Ac to A$2.70 following its annual result.