Here's what the new TPG will look like when it absorbs iiNet

iiNet marketing material.

TPG Telecom will have 1.7 million customers and revenue of $2.3 billion when it finalises its purchase of iiNet.

The stock in both companies is soaring on news of the takeover bid. iiNet is up 27%, with shares almost at TPG’s valuation. But TPG is up 18%, showing the market is red-hot for this deal.

The $1.4 billion cash deal will create another major player in Australia’s telecommunications industry and give TPG a deep well of quality customers and a top shelf marketing machine in iiNet.

Those 1.7 million combined customers are retail fixed-line internet subscribers, a number which would be second only to Telstra’s 3 million fixed broadband user base.

That’s big business and the opportunity is bigger.

A key feature of the deal is that the combined entity has a very successful formula, via iiNet, in acquiring NBN customers as the fast internet gets rolled out to new geographic areas.

NBN growth is strong with 60,000 subscribers and as the NBN roll out continues so does the iiNet marketing machine target the new suburbs getting the faster internet access.

Overall, in the six months to December, iiNet signed up 25,000 new broadband customers. Here’s how the growth, including NBN, looks:

iiNet’s 975,000 broadband customers compare to 988,000 at Optus. TPG had 748,000 broadband customers at last report, which was the 2014 financial year. It hasn’t yet reported its first half results.

Another growth area is geographic. iiNet, founded in Perth, has been concentrating on expanding in the eastern states, as this chart shows:

The financial show both companies are very good at acquiring new subscribers in a cost effective way and adding that benefit to the bottom line.

iiNet recorded revenue of $547 million, up 11%, for the first half to the end of December. Net profit was $32 million.

TPG is also getting good growth. Revenue was up 34% to $970.9 million and net bprofit was $171.7 million, up 15%, in the 2014 financial year. This is driven by subscriber numbers, as this chart shows:

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