Superloop Limited (ASX: SLC) has bought telecommunications infrastructure company, SubPartners, in a move to expand its international capacity.
Consideration for the acquisition of SubPartners is US$2.5 million, satisfied by the issue of 1,451,869 fully paid ordinary shares in Superloop at an issue price of $2.255.
SubPartners was established to develop “high performance” and “secure” international cable systems capable of providing improved connectivity between Australia and the rest of the world.
The acquisition is set to deliver Superloop strategic assets, including ownership of international submarine cable capacity as a member of the INDIGO consortium, which is constructing the INDIGO West cable (Singapore to Perth) and the INDIGO Central cable (Perth to Sydney).
Acquiring SubPartners accelerates Superloop’s access to international capacity, the company said. Superloop also said it benefits from the work SubPartners has already undertaken including the INDIGO West and Central projects and the establishment of INDIGO consortium itself.
The INDIGO Consortium has signed a fixed price supply agreement with a cable supplier for the construction and maintenance of each cable system. Completion of the systems are expected by mid-2019.
Superloop has also provided a guarantee in relation to SubPartners' construction capital commitments to the supplier as well as its ongoing operating and maintenance commitments. Capital contributions will also be required for the construction and maintenance of landing stations as well as for the optical equipment required to manage capacity on the cables.
Total capital expenditure by SubPartners in relation to the INDIGO cable systems is expected to be between US$35 million and US$37 million from FY17 until FY20.
The INDIGO cable system is currently expected to be completed by mid-2019. Once complete, Superloop will have access to dedicated fibre spectrum capable of supporting initial capacity of at least 4.5 terabits per second.
Due to the nature of the spectrum ownership, Superloop will be able to further increase capacity as technological advancements are made.
The buy will also provide the basis for connectivity between existing metropolitan networks, creating a broad inter-connected Pan-Asian network.
Through the ability to swap capacity for access to other international cable systems, the acquisition also sees new access to markets and customers.
Superloop will also be able to configure and expand its cable capacity, independently of the other consortium members, allowing it to offer Singapore to Perth, Perth to Sydney and Singapore to Sydney routes to match customer requirements.
“We are very excited by the prospect of offering customers a fully meshed Pan-Asian network, connecting the existing metropolitan networks which we own and operate,” said Superloop Group chairman and chief executive, Bevan Slattery.
“Once the cables are complete, we will have even more capacity to meet growing customer demand across the region.”
Additionally, Superloop expects to gain a team with substantial submarine cable experience and an ability to lead or contribute to other future potential undersea cable investments.
This acquisition follows a string of acquisitions by Superloop. In September last year, the company entered into an agreement to acquire BigAir, in a transaction valued at up to $95 million.
Terms of the acquisition saw BigAir - which acquired Oriel Technologies in November 2014 - assist Superloop in its quest to become the region’s leading independent provider of connectivity services.
In addition to a full suite of connectivity, cloud and managed services solutions, the acquisition brought more than 2200 customers, over 300 points of presence throughout Australia, additional data centres and additional installed fibre. Superloop also said it delivered a "significant recurring revenue and a growing sales pipeline".
Recently, the company also signed a $20 million agreement with Vocus for international, intercapital and regional ethernet access and metropolitan fibre capacity in Australia.
The deal enables Superloop to work with Vocus to upscale its metro, national and global capacity over a 15-year period. Superloop said it allows the business to realise greater cost synergies from the BigAir acquisition.
Additionally, it provides a platform of scalable services locally as part of the Superloop pan-Asian network.