M2 spends $5 million on Edirect assets and operations
- 07 April, 2011 13:42
Telecommunications services provider, M2 Telecommunications, has entered into an asset sale deed with mobile services reseller Edirect worth $5 million.
Under the agreement, M2 will purchase more than 50,000 active post-paid mobile phone customer contracts, trading as VIP-Tel. It also agreed to buy operating assets and systems used to service Edirect’s customer base.
The assets have been purchased for a consideration of $5 million, which will be funded out of M2’s operating cash flow.
The telco services provider also appointed Salvatore Algeri and Simon Alexander Wallace-Smit of Deloitte Touche Tohmatsu as receivers and managers of Edirect, which is in accordance with M2’s rights under a debenture charge over Edirect’s assets.
As part of the acquisition, M2 will restructure Edirect’s operations and will consolidate its customer base.
The restructuring process will incur one-off expenses and is expected to achieve earnings before tax contribution of about $2 million by 2013 financial year.
In a statement, M2 CEO and managing director, Vaughan Bowen, said the acquisition would provide a greater level of control over the assets and would add value through cross-promotion of services over time.
The Australian Competition and Consumer Commission (ACCC), recently accused Edirect of engaging in misleading and deceptive conduct relating to selling mobile phone contracts to customers in areas where it lacked mobile coverage.
The ACCC alleged Edirect misrepresented the performance characteristics, uses or benefits of its mobile telecommunication services, namely that the services would work in areas where the service in fact could not work.