re: looking for a 40:1 consolidation Doubtful if TVG will...

re: looking for a 40:1 consolidation Doubtful if TVG will actually use cash for further acquisitions unless they get more equity or convertibles. The share consolidation is likely to be just give them room to issue more takeover equity.



PowerTel eyes further consolidation in the local broadband marketplace

With its takeover of corporate DSL provider Request all but complete, PowerTel has given the strongest indication yet of its eagerness for further acquisitions in the Australian market, making it a potentially serious challenger to the Telstra/Optus duopoly in the data sector.

While PowerTel shareholders are not due to make their final decision on the $55 million acquisition of Request until later this month, the two companies have already moved to promote the new joint operation, starting with a partner forum on the Gold Coast last week. Request’s network of reseller partners and its last-mile connectivity are seen as significant complements to PowerTel’s East Coast fibre network and the two aim to massively increase revenue on the back of combined product offerings and enhanced services.

According to PowerTel chief executive Shane Allan, the Request buy-up could be just the tip of the iceberg as
it and its major backer Telecom Ventures Group continue to evaluate how to best expand in the Australian market. ”After the shake-up, we can see some real consolidation opportunities. Most consolidation of new entrants has until now been by liquidation. I think we’re the first example of how a serious investor can aid consolidation with the purchase of good assets, Allan told Communications Day, adding that he expected the trend in consolidation to continue at least for the next 18 months. ”We still have a hearty appetite for it, as long
as we don’t get indigestion on the way.”

Allan said there were several opportunities currently available to the company. ”The kinds of things that will
drive us are customer revenue - being able to up-sell voice into data customers. What we are finding is that,
because PowerTel made an extra investment in voice, it’s almost like a barrier to entry. A number of other new
entrants, such as Uecomm for instance, didn’t do it, so if we merge with someone like that, up-selling voice to
those data customers would be a good move.”
Allan added that TVG currently has around $1 billion available for investment in Asian and Australian telecom
companies and has apparently given an assurance that a considerable proportion of that investment could end
up with PowerTel. Some possibilities Allan mentioned were the expansion of the PowerTel network to the West Coast and the absorption of other TVG investments such as Neighbourhood Cable and TransACT.

”They’re very supportive and it’s a great benefit to have a backer that is behind us in all sorts of ways,” Allan said. ”Interest from investors is definitely starting to come back into the market for the first time.”
Targeting around 20% of Australia’s corporate data market, PowerTel and Request are enthusiastic about
their chances of taking on Telstra and Optus, both of which they see as hamstrung by legacy systems and
service structures. The partners are looking to tap the latent market for the connection of SME branches and
provide additional services, such as VPN voice and video over the top. ”We don’t need to have a 50% market share to make our models work. We’re very focussed and cost efficient in what we do and we don’t have any of the baggage and overheads of Telstra and Optus. We’ll make a difference in the offers to market and the pricing we bring. What I want to do is make Australian business more competitive, bring the prices down and not be a duopoly follower like Optus has been. Our aim is to get a whole lot of extra bandwidth out to end users,” Allan said.

Tim Marshall