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M2-backed group buys Tel.Pacific assets for $19m PUBLISHED: 24 Mar 2014 16:24:06 | UPDATED: 24 Mar 2014 16:24:06 Share Links: email
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print -font +font Reprints & permissions M2-backed group buys Tel.Pacific assets for $19m
M2 founder Vaughan Bowen will have a big slice of Aggregato Global. Arsineh Houspian
David Ramli Related Quotes
MTU TPC
M2 GROUP FPO (MTU)
$6.000 $-0.13 (-2.12%)
Volume 825669 Value 4968959.0
5 Year 1 Day
as at 16:10 Australia/Sydney 31 MAR 2014
View Full Quote » Company Profile Telecommunications supplier www.m2.com.au Diversified Telecommunication Services (501010) ASIC 091575021 ASX Announcements 26/03/14 Appendix 3B - exercise of options 24/03/14 M2 to increase investment in Aggregato Global Ltd 17/03/14 Appendix 3B - exercise of options 11/03/14 Appendix 3B - exercise of options 28/02/14 Change of Director's Interest - Vaughan Bowen
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A telecommunications company dominated by M2 Group and its related parties has bought the calling card assets of troubled rival Tel.Pacific for $19 million.
Aggregato Global will spend $19 million to buy Tel Pacific’s 400,000 international calling card customers and the move will increase its annual revenues to $100 million.
M2 is a $1.09 billion telecommunications company that will own a 32 per cent stake in Aggregato Global. M2’s founder and executive director Vaughan Bowen will own around 8 per cent and is also Aggregato’s chairman.
The move highlights M2’s strategy of buying significant stakes in smaller telcos before helping them acquire other companies. It also owns a 12 per cent stake in telco service provider Inabox Group.
Aggregato will raise $16 million of the necessary funds through a term loan secured with Bank West along with a capital raising worth $3 million to $5 million.
But the sale is not without risk. Tel Pacific’s earnings before interest, taxation, depreciation and amortisation (EBITDA) for the six months ending December 31, 2013 was $3.1 million, which was down 36.5 per cent compared to the same period one year earlier.
Tel Pacific was also awarded the dubious honour of a Shonky award by Choice Magazine in 2009 for its additional fees and charges. It will now concentrate on its energy reselling and mobile phone business.
It told shareholders in late February that growth in its calling card and mobile business growth falling, leading to a decrease in trade receivables and deferred commissions.
“The prepaid calling card business faces a challenging future with ongoing competition and declining revenue growth, particularly driven by the trend towards prepaid mobile products,” it said at the time.
The company faces rising competition from internet-based service providers like WhatsApp and Skype, which often provide free messaging and video calls overseas.
Mr Bowen told The Australian Financial Review the calling card business targeted customers who could not afford the internet connection that rival services depended on.
“We’re going after the very cost-conscious and largely ethnic customer base,” he said. “We now have around 700,000 users who take on our products on a recurring purchasing basis.
“The big opportunity we have is linked to the US acquisition we made back in September [2013] because what we got with that is the technology that runs their pinless platform.”
The technology removes the need for customers dial a service number before entering the pin code from the back of their calling cards.
“The platform we now own recognises their ... phone number and enables them to dial directly at a heavily discounted rate,” he said. “So you take the hassle factor out of it ... and it becomes a whole lot more like your traditional dialling model.
“Since one-stage dialling was introduced in the US it has expanded the pie dramatically ... so at very worse we’ll stabilise the revenue pool in Australia and make it a meaningful earnings pool over the future.”
A Tel Pacific general meeting will be held on April 28 to vote on the deal.
M2 Group chief executive Geoff Horth said the company, which owns Dodo and iPrimus, was back on the hunt for acquisitions as part of its earnings growth strategy in February.
It delivered earnings and subscriber growth at its half-yearly financial results later that month.
The Australian Financial Review BY David Ramli
David covers telecommunications from our Sydney newsroom.
MTU Price at posting:
$6.00 Sentiment: LT Buy Disclosure: Held
