Published on the 22/04/2016 | Written by Clare Coulson
Following the finalisation of the Vocus/M2 merger in February, rumours have surfaced that Vocus is already looking at further expanding, this time taking over 2degrees…
If the rumours are true it’s a move that “would make sense” according to telco expert and IDC New Zealand’s country manager Peter Wise.
“The businesses are largely complementary, with the main area of overlap being Snap, 2degrees’ fixed player acquisition, but Vocus’s model is to run multiple brands (Orcon, Slingshot, CallPlus, Flip etc) so I expect they could make that work,” said Wise.
“If there is interest I think a lot will come down to price – 2degrees shareholders have invested significantly in 4G and will want a return. Vocus is also still going through its organisational merger with M2, so another large acquisition/merger with 2degrees would give it yet another elephant to digest.”
Questions from iStart to the respective parties were met with a ‘no comment’ from 2degrees and an unofficial ‘no comment’ followed by radio silence from Vocus. Business speak for “keep your nose out ‘cos we aren’t ready to talk about it yet”. Meanwhile an industry insider told NBR that a major customer deal has been put on hold pending further developments.
Vocus has a history of acquisition in New Zealand, buying FX Networks back in 2014 and acquiring CallPlus and its subsidiaries Orcon, Flip, Slingshot and 2talk, through the M2 deal. Adding mobile services via a 2degrees purchase must sound appealing.
Of course, such an acquisition/merger would be subject to regulatory approval, but given that neither the Australian nor New Zealand competitive watchdogs saw the Vocus/M2 merger as a threat to competition due to a “limited overlap” in services, it seems likely that a potential merger or acquisition of 2degrees would also go through unblocked. The strengthening of the number three player would more likely be seen as a favourable outcome.
The Vocus/M2 merger formed the third-largest telecommunications provider in New Zealand and the fourth-largest in Australia, reputedly worth more than AU$3 billion. If Vocus buys 2degrees the result would be a third, quite sizable, full service provider in the New Zealand market, offering both mobile and fixed services. And the combined entity would have more scale, making it better able to take on incumbents Spark and Vodafone.
However, as Wise says, 2degrees has put considerable effort and investment in to expanding its 4G network, and as of June last year had brought 4G network coverage to almost 60 percent of the New Zealand population. As such shareholders will want to get their money’s worth if there were to be a sale. As Paul Budde wrote in iStart earlier this week: “The controlling owners [of 2degrees] are private equity companies whose role in life is to make money.”
