M2 eyes off potential telco reseller buyouts

M2 eyes off potential telco reseller buyouts

Telco service provider is on the hunt for acquisitions and reveals plans for the NBN

ASX-listed telco service provider, M2 Telecommunications (ASX:MTU) , has acquisitions in its sights after posting strong results during FY11.

Newly installed M2 CEO, Geoff Horth, said it has its eyes on a number of potential targets in the telco reseller space across A/NZ and was still exploring opportunities, but can’t mention specific targets at this time.

“Having the capabilities to deliver applications that are relevant for our customers is important, and if the best way to get that capability is to buy it, then that’s something that definitely in the mix for us,” Horth said. “We recognise there are a growing number of technologies and applications that are relevant to our core target market, and as a business, we are conscious of exploring technologies that would be relevant for our small business customers.”

Horth pointed to a number of ways to develop technologies for its customers, either through building applications and partnering with existing wholesale providers or potentially acquiring that capability.

Working in M2’s favour is that the business has, according to Horth, better earnings and margins than most of its competitors as well as a very “debt light” balance sheet.

“Our year end net debt position was about $17.2 million, so for a business like ours, it would be considered a very modest debt level,” he said.

After becoming the first NBN wholesale customer through Telstra in the middle of the year, M2 hopes to see further growth in its partnership with Telstra wholesale through the NBN trial sites it is running.

“Telstra had an opportunity for us to trial as a customer of theirs, so we’ve had customers in all five of the mainland trial sites and the general feedback from customers has been positive,” Horth said.

In terms of M2’s long term investment strategy, Horth said it had not reached a firm view at this point of the number of options available, so it could either invest and build in the NBN itself on a partial or full basis, or it could choose to purely partner with an aggregator in the NBN.

“If we can get a proposition through one or more of our aggregators in the NBN that is not only commercially compelling, but also gives us access to the technologies and applications that we need to be remain relevant for our target market, and that’s most likely the direction that we’ll go in,” he said.

While the NBN initiative has been quite labour intensive, Horth hopes it will lead to further opportunities with Telstra and the NBN.

“All the customers that are in our trial sites are saying that they’ve had a significant improvement in both the speed and reliability of their service,” he said.

For FY11, M2 posted earnings before tax up 54 per cent to $48.3 million and net profit increase of 72 per cent to $27.6 million, compared to the same time last year.

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Tags NBNMergers and acquisitionsTelstraM2 Telecommunications GroupGeoff Horth


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