Fact-finding mission: iiNet's board returned from a Silicon Valley expedition determined to lock in a new strategy..

Fact-finding mission: iiNet's board returned from a Silicon Valley expedition determined to lock in a new strategy.. Photo: Louise Kennerley

iiNet chairman Michael Smith says the Perth-based telecommunications company will deploy an acquisition warchest worth more than $350 million to buy its rivals as part of an "aggressive" campaign to avoid becoming a dumb-pipe internet provider.

Speaking exclusively with The Australian Financial Review, Mr Smith said the company aimed to lock in its new three year strategy by June 30, 2014 off the back of a board-level expedition to Silicon Valley that occured in March.

The move comes as telecommunications operators around the world hunt for new sources of revenue as traditional profits from services like phone calls and text messages shift to internet-enabled companies like WhatsApp who offer the same products at a fraction of the cost.

"A lot of what we saw in Silicon Valley was about customer numbers and how quickly you die if you don't produce something that's relevant.": iiNet chairman Michael Smith.

"A lot of what we saw in Silicon Valley was about customer numbers and how quickly you die if you don't produce something that's relevant.": iiNet chairman Michael Smith.

Telcos like iiNet fear a future where they become little more than glorified plumbers who maintain the internet pipes, through which companies like Google and Facebook reap mega-profits.

On Tuesday iiNet hired two new directors with extensive experiences helping media and internet service providers, including HealthEnginechairman Patrick O'Sullivan and Trade Me director Paul McCarney.

HealthEngine is an online consumer health directory that is part-owned by Telstra, which co-invested $10.4 million with Seven West in the venture as part of its well-publicised push into the health technology space.

"We're pretty comfortable about it," Mr Smith said of the potential conflict of interest. "Patrick [O'Sullivan] is an incredibly bright guy and a quick study who has been in the sector.

"Experience in a digital world is obviously important to us and fundamental to our business [and] a lot of what we saw in Silicon Valley was about customer numbers and how quickly you die if you don't produce something that's relevant."

Improvements in Australia's internet infrastructure meant iiNet would now concentrate on becoming a "customer company" focussed on providing profitable internet services rather than a more traditional "technology company" that made its money from infrastructure and fibre networks, he added.

iiNet is far from alone in the space with Telstra investing billions of dollars in its strategy of providing profitable cloud computing services throughout Australia and Asia as the national broadband network destroys its dominance of the phone and internet networks.

The Perth-based company did not always believe in moving away from infrastructure networks. It attempted to buy fibre optic network provider AAPT for $350 million in late 2013 but was foiled by a $450 million bid by rival provider TPG Telecom.

"We feel aggressive about this ... and if we're going to maintain the lead we have in terms of customers telling friends and colleagues 'we would recommend you join these guys' then we're going to have to do more for them," he said.

"We had another board meeting on the CEO hunt today and we've appointed a company called Leadership and Succession to help us draw up the mandate for the chief executive ... to make sure they are a CEO for the iiNet of the future and not the one that's been in place the past few years."

Mr Smith said the person who replaced iiNet founder Michael Malone as chief executive of the company had to be prepared for a new doctrine.

The current acting chief executive David Buckingham was doing a good job and remained a strong contender for the position permanently, he added.

"We'd like to get it finalised by the end of the financial year and if it's David then he simply continues on as he is," he said. "Our clear instruction to him is to lead the company as if he's got the job.

"We don't want him acting as a caretaker and he's not because he's been making moves."

Growth through acquisition would likely play a major part in the new strategy with the company strengthened by a strong share price and growing pool of broadband customers, he said.

"We don't feel like we're constrained by resources ... and we could get to [$350 million in late 2013] and things have only gotten better since then," Mr Smith said. "Our cash flow is strong, our business performance is good and the share price is largely holding up so we've got firepower.

"But we'll acquire at the right price and invest in organic growth at the right price.

"As [iiNet] chairman, I don't think I've ever been to a board meeting where there wasn't some lingering idea or theme or target that was on the radar."