acquires protel communications

M2 Telecommunications Group Limited
ACN 091 575 021 (ASX : MTU)
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Company Announcement – 2nd February 2005
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M2 ACQUIRES PROTEL COMMUNICATIONS
On Wednesday 2nd February 2005, M2 Telecommunications Pty Ltd, a wholly owned subsidiary of
M2 Telecommunications Group Limited (collectively referred to as “M2”) entered into a sale
agreement whereby it acquired 100% of the share capital of Protel Communications International
Pty Ltd and Protel IP Pty Ltd (collectively referred to as “Protel”).
The consideration paid by M2 for Protel is comprised of a minimum payment equal to $1.5M plus
an additional consideration of up to $1.5M, payable on 15 July 2006, subject to specific
performance milestones related to the gross operating profitability of Protel for the period between
February 1 2005 to June 30 2006.
Protel is a Sydney based telecommunications service provider incorporated in 2001, specialising in
the provision of voice, data and mobile services for (larger) small businesses and medium sized
corporate customers.
Protel has been acquired by M2 as a going concern, with the majority of Protel’s key personnel,
including the principal vendors being either employed or engaged by M2. Protel’s core operations
are to continue to operate from its existing inner western Sydney office premises.
In light of the ongoing involvement of the Protel vendors in the operations of the business, the
abovementioned consideration and additional consideration are comprised of a combination of
cash and M2 Telecommunications Group Limited ordinary fully paid shares (MTU Shares). The
MTU Shares issued to the Protel vendors are subject to certain trading restrictions, in accordance
with ASX Listing Rules.
In line with M2’s stated strategic plan (as per Prospectus, dated September 7 2004) to acquire
complementary businesses within the telecommunications service provider market and to increase
M2’s presence in New South Wales, the Directors believe that the Protel acquisition is a
strategically effective move for M2 and are pleased to have agreed appropriate commercial terms
with the Protel vendors.
The key strategic benefits to M2 arising from the Protel acquisition, may be summarized as follows:
• Provides an established base of small & medium enterprise customers, adding to M2’s
operating profitability and further enhanced through economies of scale and wholesale
purchasing improvements.
• Adds key management personnel to M2, bringing with them proven capabilities in mobile,
data and emerging telecommunications technologies, including wireless broadband and
Internet Protocol technology.
• Increases M2’s competitiveness in the medium enterprise and small corporate market,
through broader product offerings and enhanced corporate sales capabilities.
• Provides M2 with a increased management and customer presence in the NSW market
On the basis of preliminary forecasts for Protel in 2005/6, the total consideration to be paid for
Protel will represent a purchase price multiple of approximately 3.7 times forecast NPAT. The cash
component of the consideration and additional consideration is to be paid out of M2’s existing cash
reserves and payment is staged over a seventeen month period, thus not adversely impacting M2’s
day-to-day working capital.
The Earnings Per Share (EPS) contribution of Protel to M2 for the 2005/6 financial year, based on
the abovementioned preliminary forecasts and taking into account the MTU Shares issued as part
of the Protel payment consideration, is forecast to be approximately 1c per MTU Share,
representing a 28.5% increase in EPS as compared with M2’s 2004/5 EPS forecast of 3.5c per
share.
With regard to the remaining four months of the current 2004/5 financial year, the Directors have
taken a conservative view in opting for M2’s forecasted earnings for this period to remain
unchanged, having taking into account the anticipated one-off integration costs of certain of the
operational aspects of the Protel business and the staged timing associated with realising
wholesale purchasing benefits and other scale economies for Protel.
For investors seeking additional information on the product and service offerings of Protel, this may
be obtained by visiting www.protelcommunications.com.au
For further information, please contact :
Darryl Inns
Company Secretary
P : 03 9524 7555
F : 03 9524 7524
E : [email protected]