In just one decade, M2 Telecommunications has grown from a humble communications equipment manufacturing company to a $400 million business. With its purchase of some of Commander’s assets in June, the company has also become a major player in the ICT channel. M2 CEO, Vaughan Bowen, talks to ARN about the NBN, reseller opportunities and why it pays to be niche.
Tell us about your company’s background.
The company was founded by myself and a small group of investors in December 1999 and we have been listed on the ASX for five years. It started as a manufacturing business out of South Australia making digital messaging equipment like voicemail systems and the like. We did that for a few years but it never really gained the momentum that I had hoped for, so I felt the next logical step was to get a recurring revenue steam through fixed -line services.
We bought a little reseller company based in Melbourne called Select Tel, which only had about 150 customers but it had a billing system and a carrier, reseller and wholesale relationships so we bought it, re-badged it went about selling fixed-line voice services in the small business market – one we were familiar with since we specialised in making equipment for that sector. Over time, we expanded to being a full service telco reseller and offered mobile, broadband, wireless broadband and hosted services products.
What impact do you foresee the NBN having on your company?
My sentiment is it’s going to be very positive. Essentially, in an NBN environment, everyone becomes a reseller, which is something we are familiar with. We are the country’s largest reseller so we know what it is like operating on reseller margins and we are readied for the network.
When you have your own DSLAMs, fibre or infrastructure, you are enjoying deeper gross margins whereas you won’t have that luxury in an NBN environment. It will be interesting to see how other ISP businesses adapt.
Recently, Internode carrier affairs manager, John Lindsay, expressed concerns over the NBN’s access prices, which have yet to be released. Do you share his concerns?
If the estimated cost of the NBN, at $43 billion, is accurate, it doesn’t suggest it is going to be able to, at least in the initial instance, deliver broadband prices we have been familiar with. It will be delivered at a higher price but then over time that might change as the Government may take a more national benefit view on things and not just concern itself with fiscal return on assets.
If it is delivered at higher prices, then everybody is subjected to them and we’ll all be on the same playing field. It’s more about what the margins are and not what the prices are.
M2 took on some of Commander’s asset in June. How has that worked out for your company?
It’s been terrific. It’s been six months since we had those assets in the business and we basically bought the Commander brand and took over its entire distribution channel. We also kept most of the people.
Historically, Commander was very hardware focused [Commander phone systems]. Our main focus is making sure all those loyal phone system customers also have network services from us such as mobile, fixed-line and data services. The number of customers has increased and we have more than tripled the sales generated from sales channel compared to where the business was during Commander’s receivership. It has performed above expectations, which is always nice when you make an acquisition because you never know what it is going to be like.