iiNet shareholders have approved a $1.56 billion takeover offer from TPG Telecom in a move that will create Australia's second-biggest provider of fixed-line internet services.

Shareholders gathered in Perth on Monday morning to vote on TPG's controversial bid, which has seen iiNet's founder Michael Malone and major institutional shareholders slam the offer at various stages.

iiNet chief executive David Buckingham and chair Michael Smith. Credit:Peter Braig

But despite a last-ditch effort by Merlon Capital's Hamish Carlisle to rally voters against the deal, TPG won the day with 100.6 million votes in favour and 5.2 million against. Almost 94 per cent of proxies were in favour of the deal.

TPG will now become a telecommunications powerhouse with 1.7 million broadband subscribers and the power to reshape the Australian internet market. This places it behind Telstra's 3 million accounts and ahead of Singtel-Optus' 1.03 million users with M2 Group a distant fourth.