Ihug's horizons too far for Sky

By Adam Gifford

Internet service provider Ihug has proved too entrepreneurial for Sky Television, which has dropped its plans to buy 30 per cent of the company for about $30 million.

Ihug is now courting other investors and talking of a stock exchange listing of its own within the next 12 months.

Sky's chief operating officer, John Fellet, said Sky thought it was buying a stake in a local internet operator.

"During the course of our negotiations it became clear Ihug has international aspirations, which may be positive but we're not interested in expanding offshore," Mr Fellet said.

He said Sky was still interested in working with Ihug on joint marketing initiatives, similar to the promotion it ran with Meridian Energy which has so far won it about 6000 new subscribers.

Ihug director Nick Wood said the collapse of the deal "leaves us happy people".

"We realised it wasn't going to work. They wanted different things, their focus is on New Zealand. We focus on New Zealand and a few other places, and we have a more diverse product range than Sky was prepared to go with."

Mr Wood said Ihug was now free to talk with at least four other companies which have expressed interest in investing in the family-owned company.

"There's nothing concrete, and we're not that worried. The company is strong, doing well, and we'll probably list ourselves in the next 12 months."

He said funds were needed for a planned investment in new telephony solutions early next year, as well as other technology investment.

Ihug has about 90,000 subscribers, 60,000 in New Zealand and the rest in Australia. It was also looking at delivery of services into the United States and into Pacific Island countries covered by its satellite footprint.

The Wood family made this year's National Business Review rich list, based on the price the Sky deal put on their shares. Now it's fallen through their value is again moot.

Mr Wood said Ihug could be worth as much as $200 million, based on recent listing prices for internet companies. As recently as July he was estimating the value at about $114 million. "Sky was getting a good price," he said.

Mr Fellet said Sky Television management want to build up a base of 100,000 digital subscribers before it branched into other major technology offerings. It currently has about 65,000.