June 28, 2016 / 11:55 PM / in 2 years

Australian telecom firm Vocus buys rival, gains ground on market heavyweights

SYDNEY (Reuters) - Australia’s Vocus Communications Ltd (VOC.AX) said it plans to buy smaller rival Nextgen Networks and two undersea cable projects in a deal worth up to $640 million, as it seeks to close the gap on market leader Telstra Corp Ltd (TLS.AX).

Telstra dominates the Australian telecoms and internet market, but rivals like highly acquisitive Vocus are jostling for exposure to a government-led A$40 billion national broadband network which aims to bring high speed internet to all Australians by 2020.

Vocus, Australia’s no. 4 telecoms firm, said it planned to buy Nextgen and the undersea cable projects from Canada’s Ontario Teachers’ Pension Plan and Spanish-controlled infrastructure giant CIMIC Group (CIM.AX), which was formerly called Leighton Holdings.

The acquisitions worth A$861 million follow months of expansion by Vocus, which announced its purchase of rival M2 Group Ltd MTU.AX for $1.3 billion in September and last year made a successful takeover offer for Amcom Telecommunications AMM.AX.

Nextgen is one of Australia’s largest fiber networks with 17,000 kilometers (10,560 miles) of cable, connecting capital cities to regional and remote areas, Vocus said.

“Now they have got all the pieces to have a fully integrated network and they will be able to compete with the bigger players,” said Baillieu Holst senior equities analyst Luke Macnab.

One of the two undersea projects will link the cities of Darwin and Port Hedland in Australia’s north, while the other will join Singapore, Jakarta and Perth. Construction has yet to begin on either project.

CIMIC Group, which owns 29 percent of Nextgen, said in a statement that the sale allows the company to focus on its core businesses of infrastructure construction and contract mining.

The acquisitions are subject to clearance by Australia’s competition watchdog and are expected to completed in approximately three months, Vocus said.

Vocus asked for its shares to be placed in a trading halt on Wednesday until July 4 due to the capital raising. CIMIC shares rose as much as 2.3 percent on news of the deal.

Vocus reported a tripling in underlying net profit after tax to A$27.4 million for the half year to December 2015.

Reporting by Tom Westbrook; Editing by Byron Kaye and Edwina Gibbs

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