"If I lose I get rich. But I've spoken to my family and we are willing to walk away from this deal because it's not the right one for the company."

The revolt is an extraordinary development and is seen as a failure by iiNet's board to properly sell the deal to its biggest shareholders.

On Monday Mr Malone took the unusual step of hijacking iiNet's first conference call for investors, held 10 days after TPG's bid was first announced on March 13, to express his disappointment directly with major shareholders and chairman Michael Smith.

"I believe this deal counters everything you're saying, Michael Smith," he said. "It's incomplete, unprofessional and it's poor diligence. It's been ten days since the deal was announced and it's only now that you decide to speak with shareholders.

Mr Malone slammed the company's operations in the year since he stepped down and said it had lost its way thanks to a "bored board". He called for all but two of the directors to be sacked and replaced with technology entrepreneurs instead.

"I still don't know even today whether the question has been asked of TPG if the executives will keep their jobs and what will happen to the staff," he said. "We have 1000 people in Cape Town, South Africa that woke up to hear that message in the media and they have no idea if they've got a job in July [and] what about the 1000 people we have in Australia?"

Mr Malone was initially ready to accept TPG's offer, pending consultation with his family. TPG on March 13 offered to buy out all iiNet shareholders for $8.60 per share in a deal that would value the telco at $1.4 billion.

However, a lack of communication from iiNet's directors and further review of the offer has turned his stance. Mr Malone directed most of his blame against iiNet's board of directors, rather than its senior management team or TPG, telling them simply to "leave".


Mr Malone, who admits his move may not succeed, has become the most high-profile opponent of TPG's takeover offer and it is expected some smaller shareholders could rally behind his call. He owns around 2.5 per cent of the company, making him one of its biggest owners.

BT Investment Management owns 5.7 per cent and its head of smaller companies Paul Hannan continued his strong criticism of the deal, adding the board had not fulfilled its duties.

"I don't believe you can honestly know what the next best alternative is if you haven't opened it up to a market sale process," he said.

But iiNet's Mr Smith was adamant that the company had fielded a range of inquiries in the 12 months leading up to TPG's bid – none of which had resulted in a complete offer. Instead, analysis by the board had shown that the $1.4 billion offer was the most profitable option and that by comparison, continuing to run the business as a stand-alone operation was second-best.

"We had discussions with someone about six months ago about potential discussions," he said. "Most of what we've heard [from shareholders] is positive [and] even people who have voiced concerns have said the price is a good price. This is now the beginning of our consultation period with shareholder."

He strongly rejected Mr Malone's criticism and said the founder had not been a part of the company for 12 months and could not understand the products and services being developed.

Singtel-Optus has been cited by industry sources as a potential buyer of iiNet. But a spokesperson for Optus said the company had not had any merger or acquisition discussion with iiNet. She declined to comment on whether the company would make a bid in the future.