Published on the 29/09/2015 | Written by Beverley Head
Just months after acquiring Callplus, rapidly growing telecommunications giant M2 is eyeing up a merger with Vocus, as ANZ telecommunications consolidations gathers pace…
The boards of M2 and Vocus today announced they have agreed to support a proposed merger between the companies’ Australian and New Zealand operations that will create an entity with a combined revenue of $1.8 billion on day one, and the opportunity for $40 million worth of cost savings.
If the merger goes ahead the newly combined entity will be value at more than $3 billion and be Australia’s fourth largest integrated telecommunications company, and the third largest in New Zealand.
Brands covered by the deal include dodo and iPrimus in Australia and Slingshot and CallPlus in New Zealand.
The deal is likely to face scrutiny regarding the continued consolidation in the sector.
TPG famously spent $113 million attempting to put the kybosh on the Amcom-Vocus merger but failed. Despite having itself merged with iiNet recently, TPG might not be too thrilled at M2-Vocus now nipping at its heels. M2 of course did also attempt to buy iiNet itself before being outplayed by TPG.
However according to the merger implementation agreement which was released today both the Australian and New Zealand competition watchdogs have signalled they don’t plan to “oppose, intervene or seek to prevent the implementation of the scheme.”
If that proves the case then the all scrip merger could take effect in early 2016.
According to David Kennedy, telecoms research director for analyst Ovum, the additional scale the merger would deliver is important – but he said that the consolidation in telecommunications is now reaching its “endgame.”
“M2 challenged TPG’s acquisition of iiNet with its own offer, but TPG outbid it. This showed that M2 was very interested gaining scale, as it needs to in order to compete with the leading three – Telstra, Optus and TPG – once the NBN is fully rolled out.
“Vocus operates primarily in the enterprise and wholesale market, so this is when the impact will be most felt. The combined M2 and Vocus networks will provide a strong base for the provision of services to the enterprise and small business segments, and to small independent ISPs who purchase telecommunications capacity.”
Vocus is most certainly the smaller sibling in the deal, with revenues of $315 million compared to M2’s $1.3 million. But the future management structure reflects both companies’ heritage with M2 CEO Geoff Horth tipped to be CEO of the merged entity which will be chaired by Vocus’ David Spence.
