Written on the 10 February 2010
SP Telemedia, better known for its TPG internet service brand, has offered to buy Pipe Networks in a $373M deal with a proposed $6.30 cash per share. The transaction is subject to completion of due diligence by December 11 and funding confirmation by December 18. Pipe shareholder approval will be sought at a meeting in March and if all goes well, the merger will be completed by April.
Following the completion of the $200 million PPC-1 cable from Guam to Sydney, did you ever expect to get this far when you started PIPE Networks with Steve Baxter in 2002?
Certainly not. When we started PIPE Networks our goal was to get enough recurring revenue and profit to allow us to take a day off each Friday to go fishing. We’d both started and sold our previous businesses and thought of PIPE as a way to start a new business without needing to push ourselves to much, take it easy. As you can see that principle didn’t last too long.
Can you discuss your vision for a more competitive internet landscape in Australia and how your company plays its part?
Our vision is to improve competition and connectivity choices at the infrastructure layer through strategic investment in new infrastructure assets. Our part in the vision has been to get competing carriers — such as iiNet, Internode, TPG and Primus — to support us to build fibre and data centre assets that provide them with improved connectivity and scalability as well as reducing their cost to deliver services to consumers.
With their support we’ve built Australia’s third largest metro and domestic fibre network — Australia’s largest behind Telstra and Optus — as well as the submarine cable to Guam.
What comes next?
A long break over Christmas. But seriously, our focus right now is to get as many people connected to PIPE Networks - most of the infrastructure we have is now a sunk cost and our incremental cost to light up additional capacity is very low. The more capacity we sell on our network, the greater our profitability.
What will the Federal Government-instigated break up of Telstra mean for your business and the competitive landscape?
We’re not 100 per cent sure. On paper it seems like a good thing, but I think it’s far from a done deal just yet.
There are so many moving parts with NBN and Telstra at the moment it’s difficult to get a solid understanding on where it’s going to land.
One thing I know is that if the NBN happens, we’ll all be using more and more internet traffic which should only be a good thing for us.
When Steve (Baxter) went to the US to work for Google, how did you handle the adjustment?
Having a co-founder and CTO leave is always a challenge, but Steve did a great job of preparing for his departure so that his replacement, Jason Sinclair was able to hit the ground running.
The transition was relatively straightforward and Steve is still involved on the board so there’s no change there.
As an entrepreneur what is the greatest adversity you’ve faced?
That’s easy — the global financial crisis. Heading into September last year our project was still finalising approximately $90 million of project finance for the PPC-1 project. Then when Lehman’s hit the wall and banks stopped lending my worst fear got worse.
I was worried we would have to raise a substantial amount of additional equity to supplement a smaller project finance amount.
With the Australian dollar sitting at $0.62 and our share price down more than 60 per cent from its highs, things were dire.
To make matters worse the banks were just sitting on their hands and whilst promising the formal proposal, they just kept giving us excuses for delays. So it was at that point we had to pull the pin on the banks and go direct to customers and suppliers.
Remarkably, by having our supplier re-schedule invoicing with customer receipts and some customers bringing forward payments to align with supplier payments, we were able to proceed without any bank finance at all and saved about $8 million in fees.
Fortunately the project had major pre-commitments from global industry players and it was with their support and our supplier that the project was able to self-fund its completion.
Who is your biggest role model in business or in general, and why?
I’ve never really had a mentor or role model in my business life. I think the role models which have shaped my business career the most would be my family and friends, particularly back in my early years in Rockhampton. I understood the value of respect from an early age and I think that’s vitally important.
What makes the best entrepreneur?
I think the best entrepreneurs are the ones who are motivated by making this world a better place. It’s that simple.