Inside The Downfall Of iiNet Sydney

Image: iiNet

TPG currently stands as the second largest internet service provider (ISP) in Australia, and is a force to be reckoned with in the telecommunications industry. Its rapid growth is mainly attributed to strategic acquisitions it has made in recent years. One of those acquisitions was iiNet, an ISP that boasted high customer satisfaction and respect in the community.

A year after TPG bought iiNet, the situation looks bleak for the ISP that was once the darling of the telco industry. Most recently, iiNet's Sydney office was shut down, most of its staff made redundant. We spoke to one former iiNet employee to get the insider story on the aftermath of the TPG acquisition. We also spoke with iiNet, to get its side of the story.

Updated 9/12/16 5:38pm: Added comments from former iiNet employee from the Melbourne office.

This story originally appeared on Lifehacker Australia.

Conflicting values

TPG completed its acquisition of iiNet for $1.56 billion late last year. At the time the acquisition was announced, questions were raised over how iiNet's culture and operations would be impacted.

The Perth-based ISP was founded in 1993 by Michael Malone and Michael O'Reilly in a garage. Despite the company's rapid growth, iiNet held on to its relaxed and open attitude not only towards staff, but to customers and the media as well. iiNet's executive team were approachable and outspoken about industry topics even if it ruffled a few feathers. The company was also undeniably skilled at providing good customer service, which has been well-documented.

Meanwhile, TPG was a low-cost ISP and had garnered a less-than-desirable reputation, racking up a long list of customer complaints. You sign up to TPG not because of its customer service, but because the internet packages were dirt cheap. TPG CEO, David Teoh, was a notoriously reticent and reclusive man who rarely gave interviews. Today the telco is a force to be reckoned with, having snapped up PIPE Networks, the consumer arms of AAPT. It now owns a 100% stake in iiNet, one of the most well-loved ISPs in the country.

While it made sense for TPG to grow through acquisitions, there were concerns about the future of iiNet. The two companies held completely different values on a number of industry issues.

For one, iiNet has been willing to protect customers from big Hollywood studios that wanted to sue them for alleged copyright infringement. It has gone to court to do so, refusing to bend to studios' requests to send infringement notices to subscribers and refusing to surrender information on suspected content pirates.

Meanwhile, TPG was happy to send infringement notices to customers suspected of pirating copyright material.

iiNet was vehemently against data retention laws the Australian Government introduced earlier this year. TPG remained silent over the matter.

iiNet had been eager to ingratiate itself with customers to build up trust in the brand. TPG doesn't seem too worried about that. At the time of the acquisition, there was apprehension over how the buyout would impact iiNet's loyal group of customers and its team of dedicated employees.

Malone, who left his post as iiNet's managing director in 2014 but remained a shareholder of the company, was against the acquisiton.

Business-As-Usual?

iiNet has offices in nearly every capital city in Australia. When news of the TPG acquisition was made public, iiNet staff were reassured by both the management and human resources teams that it would be business-as-usual.

Commentators in the telco industry had already noted that it would be a bad idea for TPG to make changes that would tarnish iiNet's stellar reputation. iiNet was the premium brand here and it was best it remained that way.

But changes started happened at the beginning of 2016. A source from iiNet's Sydney office told Lifehacker Australia that it began with small changes, mainly cost cutting. Customer service members were no longer able to apply credit to customer accounts without approval from upper management; they had previously been able to offer $50 without seeking approval.

iiNet general manager of customer service Matt Conn spoke to Lifehacker Australia about the changes.

"There has to be a balance with our credit policy," he explained. "Fixing the root cause of a problem instead of applying credit to appease a customer is something we're focused on."

According to our source, major changes didn't kick-off until March. Teams in the Sydney office were being shut down every few weeks and some members were shuttered over to TransACT, a division of iiNet that maintains the VDSL network in the ACT and the HFC network in parts of Victoria.

iiNet's Sydney office was down-sized as well. Staff were moved from a newly furbished modern office on Market Street in the CBD to a smaller premises on George Street nearby.

Local customer service roles were increasingly being shifted to overseas call centres, mainly in South Africa. Up until that point, overseas call centres were only supposed to provide support outside of Australian working hours.

Customers noticed the difference.

"Our Net Promoter Score (NPS), used to measure customer satisfaction with a company, started to drop dramatically and customers started to complain about bad customer service," the source said. In fact, the TIO documented a whopping 48.2% jump in complaints against iiNet this year.

Conn refuted this claim, stating that the company's NPS has remained consistent and is currently at 54. However, iiNet's NPS was well over 60 - closer to 64, according to our source - back in 2014.

Some iiNet employees left of their own accord, fed up with the constant changes and uncertainty that TPG had brought in. At one point, over a two-month period, there was only one person in the iiNet Sydney office taking customer service calls.

The Sydney office began to empty out and by the time it was completely shut down on December 2, only a skeleton staff remained - 30 employees were manning the fort, down from around 200 just over a year ago, according to our source. They had been moved to a smaller office formerly occupied by staff from AAPT, another one of TPG's acquisitions.

iiNet's reason for closing down the office was that it had always been predominantly a contact centre site and natural attrition led to a smaller team, which made it difficult to manage, Conn said.

In TPG's Annual Report released in September this year, Teoh had this to say about iiNet:

"While there is still much to do, I am pleased to report that the integration is progressing well. Employees from both sides of the merger have risen to the challenge of the integration and have continued to deliver the premium levels of customer service for which iiNet has gained a strong reputation."

That sentiment was not shared by iiNet's Sydney office. On November 25, just a few weeks before Christmas, the remaining workers at the Sydney office were told that they were being let go.

Conn said that he spoke to each employee directly about the office closure and that iiNet had tried their best to offer roles to the remaining staff but most of them refused the opportunity.

"We still had several roles that weren't filled; there were a substantial number of roles and we wanted to attempt to retain most of the staff. There was almost enough roles to fit office," he said. "The benefit of iiNet becoming a part of a bigger group [TPG] is that that there are more opportunities available.

"We were committed to retain as many staff members as possible."

iiNet was even willing to consider creating new roles for the remaining staff, internally or at other TPG-owned companies, to ensure all the staff had a chance to remain with the business.

Our source refuted Conn's claims.

"I don't know about other staff but I never had a conversation with Matt Conn," our source said. "The majority of roles offered through to us were roles well above what we were suited for (high-level tech and managerial positions) and even the people who were suited for managers roles had a hard time getting them. Our team senior was knocked back for a management role though he had been doing it for years."

The Future Of iiNet

Our source suggested that the Melbourne iiNet office will also be shut down shortly. Lifehacker Australia questioned Conn about whether there were any plans to close other offices around the country.

"We have to constantly review operational structure, but there are no immediate plans for anything," he said. "However, in saying that, we are reviewing all parts of the business. It will depend on timing and the number of available roles; our focus is on redeployment."

We pressed him further on whether there were any discussions about closing down the Melbourne office.

"The Melbourne branch does specialist tasks for us; right now, that is the focus for them," Conn said. "There are roles with in the [TPG] group that are open to staff, depending on how it all plays out. Today, Melbourne is a key part of our business."

However, a former employee from iiNet's Melbourne operation told Lifehacker Australia that the company had sent out an official email internally to informed staff that the office was to be closed down and the remaining staff would be moved to TPG's offices in Richmond, Victoria. Lifehacker Australia was unable to verify this because our source no longer had access to his former work email account. We have contacted iiNet again for additional comment.

Our source from the Melbourne office claimed that before he left, a huge portion of the staff had already been culled and office perks such as fresh fruit and coffee machines had been taken away from the break room.

"From a technical staff point of view, no major changes were allowed due to TPG management, which meant that project work and improvements had been thrown to the wayside which effectively turns engineers and admins into zombies, firefighting the same occurring issues over and over again," our source said.

On the iiNet official website, it currently states: "We employ more than 3,000 enthusiastic staff across three countries - 80 per cent of whom are employed to directly service nearly one million customers."

Our source from the Sydney office speculated that most of the 3000 staff are in overseas contact centres and highlighted that the page hasn't been updated for some time. Right now it seems like a relic of iiNet's golden days.

"The worst part is not that we are losing our jobs; we will bounce back," our source said. "It's the loyal iiNet customers who will suffer the most out of all of this. It need to be known that iiNet is just TPG wearing the shredded remains of iiNet's skin and taking advantage of (a quickly disappearing) reputation to gain customers."

Conn, on the other hand, believes iiNet has benefited a lot from being a part of TPG.

"In the last 12 months, we've released new products that have been beneficial to our customers and that is a positive thing that is overlooked at times," he said. "There is a heavy focus on our network stability, which has increased, and there are other products that TPG have that we can take advantage of.

"Being part of the bigger group, I honestly believe, brings benefit to our customers."

This article originally appeared on Lifehacker Australia