Optus’ acquisition of Vividwireless Group for $230 million is a good deal considering the capital expenditure that has already been spent on the business, according to communications research firm, Telsyte.
Vividwireless Group, owned by Seven Group Holdings, encompasses the vividwireless and Unwired brand.
Seven Group bought unwired in 2008 for $127 million.
Optus announced it would buy Vividwireless Group and take over its operating business, customer bases, network and, most importantly, spectrum licences. The telco will gain access to Vividwireless Groups licence in the 2.3GHz band.
Along with the purchase price of Unwired and expenditure in the deployment of vividwireless’ metropolitan ‘4G’ WiMax networks, Telsyte research director, Chris Coughlan, estimated Seven Group Holdings spent around $300 million in capital alone on Vividwireless Group.
“$230 million is a good buy, especially with the price of the spectrum,” he told ARN.
Spectrum licences in the 2.3GHz band is due to expire in 2015 but the Federal Government’s announcement on prices on spectrum renewal this year, it provides a lot more certainty for wireless network operators.
Communications Minister, Senator Stephen Conroy, has set access charges for 2.3GHz at $0.03 per MHz per population, far cheaper than $1.46 for 800MHz and $0.63 for 2GHz.
For Vividwireless Group, it puts some certainty on its assets, making them more attractive to potential buyers.
But with a wireless broadband business on the up and up, is it wise for Seven Group Holdings to rid itself of Vividwireless Group?
According to Coughlan, Seven Group has been looking for something to do with its wireless asset for some time. When it initially purchased Unwired in 2008, there was an industry expectation that the group would invest more into the business. Unfortunately, it missed that boat.
“So basically [the Vividwireless Group] has been languishing for quite some time,” Coughlan said.
With spectrum licences expiry date edging closer, the value of those assets depreciate. Seven Group Holdings is left with two choices: Get more capital to deploy more networks or sell up. Clearly it has chosen the latter.
It is unclear what Optus plans to do with the vividwireless and Unwired businesses in the future. A likely option is for the telco to bring both brands under the Optus name.
vividwireless and Unwired do not have much brand equity, especially in the East Coast, according to Coughlan.
“But you never know; Optus might just keep the names,” he said.