iiNet In Trouble
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iiNet is in trouble. With its shares suspended for five weeks it is now revealed that the company is forecasting a 40 percent profit downturn.

The company says earnings before interest, tax, depreciation and amortisation to the year ending June 30 – of $24.6 million – will be almost 40 percent lower than the guidance of $40.1 million announced earlier.

iiNet has also revealed that wholesale telco PowerTel has taken up a 14.9 percent share placement in the company costing $10 million. PowerTel is paying 85c a share for most of its shares, against iiNet’s last traded price of $1.69.

Executive chairman Peter Harley said iiNet’s internal processes had not kept pace with its rapid acquisition expansion with takeovers including ISPs iHug and OzEmail.

“In every other six-month period since 2001, there has been either a large acquisition or a major integration,” Harley said.

Auditors Ernst & Young blame one-off costs from the OzEmail integration as well as what seems to be a lack of communication between iiNet’s finance and acquisitions teams. Ernst & Young also point to “underlying profitability issues”.

In return for its $10 million investment, PowerTel will get exclusive wholesale access to iiNet’s broadband network, including ADSL speeds of up to 24Mbps; and will provide iiNet with wholesale network services.

PowerTel MD Paul Broad said the deal would accelerate the company’s access network roll-out by two years with minimum capital outflow and eliminating network duplication.