How telco entrepreneur Michael Malone made up his mind to quit iiNet; iiNet founder Michael Malone says he faces a “long, dark road”

How telco entrepreneur Michael Malone made up his mind to quit iiNet

Published 24 March 2014 10:09, Updated 24 March 2014 10:10

David Ramli

iiNet founder Michael Malone says he faces a “long, dark road”. Photo: Bohdan Warchomij

In the crowded corner of a fashionable Sydney watering hole, between moonshine martinis and 1930’s jazz, iiNet’s founder and chief executive was characteristically frank in his review of bosses that leave their post.

“I think the whole work/life balance thing is bullshit,” Michael Malone toldAFR Weekend at the Prohibition-themed bar Palmer & Co in early 2013. “You’ve got to do what you enjoy, and I think you’ve got to be mindful of the impact that has on other people.”

“I really like my job and I like the stuff that comes with it.”

But a year later, following a three-month sabbatical that was meant to be temporary, Malone has thrown in the towel. Faced with a choice between returning to his duties and leaping into unemployment, he chose the latter.

“I’ve got to say I’ve got the long, dark road in front of me right now,” he said on Friday. “I did a really big trip of more than three weeks in Argentina . . . and I suppose three weeks wandering around in the mountain with no telephone access or internet access gives you a lot of time to think and reflect on where I wanted to go in the future.

“[Coming] in to the office on the weekend and sitting at the desk . . . that thought of coming back to doing this nine-to-five just didn’t thrill me.”

Malone leaves at a pivotal point for the company he founded from his ­parent’s Perth garage more than 20 years ago.

What began as a hobby for like-minded geeks in search of a better internet connection became one of Australia’s biggest telcos: iiNet now has a market capitalisation of more than $1.23 billion and almost a million broadband customers.

But where installing equipment at telephone exchanges and offering superior customer service was once enough to produce sky-high profit ­margins, the national broadband network is set to change it all by creating a much flatter playing field.

Citigroup analyst Justin Diddams says Malone is the latest in a series of ­telecommunications chief executives who have cashed out while the going is good – and crucially before the NBN reshapes the industry.

The CEOs of Vodafone Hutchison Australia, ­SingTel-Optus, AAPT, Adam Internet, Internode and Dodo have all left the top jobs at their respective companies over the past two years citing a variety of reasons.

“There’s definitely a feeling the easy yards have been achieved and now going forward it’ll get tougher to grow,” Diddams says. “Taking some of these companies to the next level may need a different skill set to pursue [mergers & acquisition] activities and rationalised operations.

“A lot of the people who have been on these businesses have been happy to sell out, with iiNet and M2 Group ­mopping all the market up.”

The departing iiNet CEO says he wasn’t pushed out of the company but admitted there was pressure from the iiNet board to make up his mind on quitting or staying.

“I think there was some implied pressure to make up my mind one way or another,” he says. “The business is in a bit of limbo unless I’m absolutely committed to returning to the role.

“I was 90 per cent sure I wasn’t going to come back.”

Malone also insists the looming NBN challenge was not the driving force behind his departure and that he has no plans to sell his shares. The company’s founder sold $28.5 million of the company in September 2013.

“But I don’t [rule out selling my share over the next 12 months],” he adds. “That’s a financial decision for my family to make on an ongoing basis and once I step off the board I’m not obliged to disclose and I’m not bound by the [sales] windows.”

It’s a comment that is likely to add fuel to speculation that iiNet is more of an acquisition target without its founder at the helm with TPG Telecom mooted as the most likely buyer.

iiNet acting CEO and chief financial officer David Buckingham will take over while a search is conducted for Malone’s replacement. A solid operator who is respected by the analyst community and telco industry, Buckingham is also the front-runner to replace him permanently.

As for where the boy from Perth will land next, Malone says he has no firm idea and that new investments or an extended holiday are all on the cards. But his prescient 2013 comments, born of a friendly drink, could be the key.

“I’m an operator and I love running the business,” he said. “If the business got taken out tomorrow, if the board decided I wasn’t the right person for the job any more, where would I be in a year?

“I’d want to be running another business that matters.”