OzEmail buy puts iiNet into top three

The Australian owner of New Zealand internet provider ihug has agreed to buy rival OzEmail to become Australia's third-largest internet service provider.

iiNet has bought OzEmail from communications company McI in an A$110 million ($121 million) deal.

Ihug general manager Guy Nelson said there was no risk to ihug staff or customers in New Zealand.

"Our staff numbers are expanding in New Zealand to cater for the growth we're getting in the market at the moment," he said.

"It's about expansion for us in the New Zealand market as well."

One internet industry commentator said iiNet seemed happy to trade on the ihug name.

"I think that the ihug brand is incredibly strong and it does say something to people.

"Xtra looks like 'the man', whereas there's still this sort of rebel feel to the ihug brand."

iiNet's managing director, Michael Malone, said the company was now in a position to compete with Australia's biggest telecommunication firms.

The purchase gives iiNet more than 620,000 customers.

iiNet said all OzEmail staff would be retained.

Although it is expanding one part of its business, iiNet is pulling back another by selling its satellite business to Bordernet.

Operating under the ihug brand the satellite business has about 3000 customers in rural areas of New Zealand and Australia.

Malone said the sale would enable iiNet to focus on its core competencies and lead to a better service for satellite customers.

"The satellite is a good business and we liked it," he said.

"But it's just not growing and it's not getting the attention it deserves from us.

"These guys [Bordernet] are keen as mustard about doing satellite."

Malone is aiming to complete the acquisition of OzEmail by the end of the month.