iiNet chairman Michael Smith said M2's share-based bid was equal or superior to TPG's.

iiNet is set to announce it has judged M2 Group's $1.6 billion takeover bid as superior to TPG Telecom's $1.4 billion offer.

In a move that could trigger a bidding war, sources told Fairfax Media the belated announcement could come as early as Wednesday night or Thursday morning after lengthy deliberations between the boards of iiNet and M2.

Analysts and major shareholders have backed the M2 bid.

Once the announcement is formalised, TPG will have three business days to respond by matching, beating or walking away from M2's offer, which is made up almost entirely of its own company shares.

However, industry insiders have also warned that TPG could respond by spending its three days buying up iiNet shares in an attempt to build a blocking stake to stymie M2 and any other would-be buyers.

iiNet and M2, which owns internet service providers Dodo and iPrimus, have been in talks to provide a detailed understanding of the latest offer.

The combined entity would have 1.48 million broadband subscribers compared with the 3 million at market leader Telstra and 988,000 at the  current second-place player, Singtel-Optus.

iiNet founder Michael Malone has also been in contact with shareholders and telco executives to promote his support for M2's bid.

Mr Malone told Fairfax Media he had sent emails and text messages to shareholders detailing why he preferred M2's share swap offer valued at $1.6 billion over the all-cash deal proposed by TPG.

His key reasons included the ability to keep shares in the combined entity, the tax rollover relief for local investors, higher valuation of iiNet and the allegedly better cultural fit.

Mr Malone is one of several key players attempting to influence the outcome of iiNet's acquisition, which could be the biggest telco deal of the decade and create Australia's second-largest provider of fixed-line internet services.

"iiNet must come out in favour of this new transaction and if they come back and say 'no, we're not going to recommend this bid' and continue to back the TPG bid, then they haven't been listening to shareholders," he said. "Given there was over $1 billion added to TPG's share price that their market cap will go down by that amount if they walk away, so there's a fairly compelling reason why they should come over the top.

"At no point has [TPG executive chairman David Teoh] ruled out coming back with a better offer."

Mr Malone has a close attachment to the company he founded from his mother's garage in Perth more than 20 years ago.

He heavily criticised TPG's bid.

He called for all but two of iiNet's board to be sacked if the deal was unsuccessful.

He added that he'd spoken about the deal with M2 executives but declined to detail the conversations.

The key positives of M2's offer included its higher valuation for iiNet, the inclusion of shares, the ability to get tax rollover relief and the high levels of potential synergies.

"iiNet and M2 combined brings in over $2 billion in revenue and growing subscribers, which is something Optus doesn't have," he said. "iiNet and M2 also have a huge amount of synergies because iiNet is in 450 exchanges with its own [broadband equipment] while M2 isn't."

This comes despite critics of M2's offer claiming that the company has greatly overestimated the potential synergies and iiNet's true value.

Mr Malone said he was continuing to make phone calls and communicate via text messages with interested parties while on honeymoon in Botswana.

However, he insisted he had not decided which deal he would vote for or against, despite supporting M2's offer over that of TPG.