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BDFL - Memuneh
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Topic # 11573 31-Jan-2007 11:03
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From their press release today:

Telecom New Zealand Chief Executive Theresa Gattung today announced plans to acquire 100% of the shares in Australian listed entity, PowerTel Limited.


The plan has been unanimously endorsed by the PowerTel directors and the proposal involves Telecom paying A$2.30* per share in cash by way of a scheme of arrangement.


Telecom has also entered into an option agreement to acquire 10% of PowerTel’s shares on issue from TVG (PowerTel’s major shareholder).  The option may be exercised at a strike price of A$2.30* per share, and is subject to certain conditions.


“This acquisition brings two strongly complementary businesses together and is a step towards the consolidation of the Australian telecommunications industry,” said Marko Bogoievski, Telecom Chief Financial Officer.


“It provides significant benefits to Telecom by enabling AAPT to leverage its investment in service capability and it gives us the scope over time to bring more of our customers onto the combined access network rather than servicing them through wholesale arrangements.


“This is a very positive step for the development of our Australian business,” Mr Bogoievski said.


The A$2.30* offer price represents a 31.2% premium to the volume weighted average price over the last three months and a 18.7% premium to PowerTel's volume weighted average share price over the last 30 days.


The offer represents full value for PowerTel and reflects the underlying improvement in PowerTel's earnings performance and the operating and strategic benefits available from bringing the two companies together.


The transaction values PowerTel at approximately A$357 million including net debt. After adjusting for the company's shareholdings in Macquarie Telecom and iiNet Limited the acquisition price reflects an enterprise value to EBITDA multiple of 7.9x based on A$42m for December 2007 year end.


Telecom anticipates that the acquisition of PowerTel will provide significant value to Telecom shareholders, with the acquisition expected to be EPS-positive within 12 to 18 months. 


The acquisition will be funded by a combination of cash and Telecom's existing debt facilities.


The transaction is subject to certain conditions, these include approvals from the Court, PowerTel’s shareholders and regulatory bodies such as FIRB and ASIC as well as material adverse change and other customary deal provisions. A summary of the key terms and conditions of the Merger Implementation Agreement is attached.


It is expected that the scheme documents will be sent to PowerTel shareholders by late March and that PowerTel shareholders will have the opportunity to vote on the scheme in late April.


If the scheme is approved by PowerTel shareholders and the Court, all shares in PowerTel will be acquired by Telecom and PowerTel will be de-listed.


Citigroup advised Telecom in relation to the transaction.



Do you know who or what does Powertel do? Neither did I, but a quick Google search tells us it's a company with lots of marketing speak in their site:

You’ll see that everything we do is centred on making it simpler for business to communicate with their customers and each other. That’s why we focus solely on business telecommunications. It’s what makes us unique. And it’s how we help our customers streamline their business.

Our suite of solutions has been further enlarged by our acquisition of Request Broadband. Although larger we’re still driven by building clarity and simplicity into innovation. We offer the full range of data, voice and internet solutions for small and medium businesses, corporates, carriers and service providers.

Owning our communications infrastructure gives us control over our destiny and means that our services are of the highest quality, reliability and value. Our extensive business-focussed network comprises both optical fibre and DSL technologies.


Ok...







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  Reply # 59344 31-Jan-2007 11:30
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Judging by the initial reaction of the sharemarket to this announcement, many people are not impressed:

http://www.nzx.com/market/security_details/by_security?code=TEL

Down 12c in the first 30 minutes until the shares were placed on Trading Halt.

I guess many people have in mind Telecom's previous disastrous foray into Australia with the AAPT acquisition (according to the Herald, almost all of the $2.3 Billion of shareholder's funds spent on AAPT have been written off as a result of that purchase).

We can only hope that things turn out better this time around.

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Reply # 59346 31-Jan-2007 11:34
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I'm reminded of AAPT

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  Reply # 59347 31-Jan-2007 11:35
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Good one Telecom..buy yourself another dog and dig your hole even deeper. UUL and regulation wasn't the end of the world in NZ but the actions from Telecom over the past 6 months are nothing but proof that the company is truely a special case.

< John Campbell Hat On >


How is this really going to improve broadband for the large numbers of customers who can't get a decent speed because of your third world infrastructure in NZ? Shouldn't you be more worried about protecting your core business in NZ from competition which *will* come this year rather than trying to play in a sandpit where everybody else has got big toys and you've got a plastic spade with no handle?

< John Campbell Hat Off>


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  Reply # 59348 31-Jan-2007 11:37
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Have you considered a career in TV? Classic John Campbell

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  Reply # 59354 31-Jan-2007 11:57
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In May last year, Powertel which is a "wholesale telco" pumped A$14 million into iiNet... which as you may have heard, wasn't at the time in the best of financial health.

It is a curious move, but it's been on the cards for about a month or so. Telecom's paying almost eight times EBITDA and a third premium on the current share price, with a total valuation at A$357 million.

Telecom is selling Powertel's ADSL2+ through AAPT in Australia, incidentally.




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  Reply # 59357 31-Jan-2007 12:01
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Any idea what AAPT's current market valuation is Juha?

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  Reply # 59358 31-Jan-2007 12:02
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I think it makes sense. Powertel have their own network and AAPT was being shafted by Telstra on the wholesale front.

'PowerTel’s fibre communications network spans key CBD and metropolitan areas, connecting Brisbane, Gold Coast, Newcastle, Sydney, Canberra, Melbourne, Adelaide and Perth. '


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  Reply # 59365 31-Jan-2007 12:23
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sbiddle: Any idea what AAPT's current market valuation is Juha?


Not sure... something like NZ$350-$400 million was the figure I saw last time.




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  Reply # 59408 31-Jan-2007 19:08
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Jama: I think it makes sense. Powertel have their own network and AAPT was being shafted by Telstra on the wholesale front.

'PowerTel’s fibre communications network spans key CBD and metropolitan areas, connecting Brisbane, Gold Coast, Newcastle, Sydney, Canberra, Melbourne, Adelaide and Perth. '



That was my thinking as well. Small competitor starts by connecting business customers, but finds it expensive to maintain momentum against an aggresive incumbent. Takeover by a big telco should release capital to fund further expansion.

One can almost see shades of the NZ market in that statement.... Tongue out




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  Reply # 59416 31-Jan-2007 20:22
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Now they can buy Telstra's CDMA network!!!!





I wonder what this means, Strange Aq...

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  Reply # 59494 1-Feb-2007 14:37
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For what it's worth, i think theres alotta merit to the idea.

Powertels network heavy, AAPTs customer heavy - makes sense for the two to get married.

Its a good price - $357 mill plus debt (im starting to see why the yellow pages is being sold). Thats naff all if you consider the cost/time in laying its own network, which until now was never an option. 

All wholesalers are getting a raw deal from Telstra - AAPTs margins are going to look alot better and perhaps it can claw back some of its original value, it could even absorb a couple of smaller ISP's here and there or do some wholesaling of its own.

Now that its a network operator in both countries its a serious contender for business from companies based here and there.

There was an NZHerald article suggesting it was going to focus more on infrastructure and less on content, yahoo coming in and again the yellow pages sale seem to support that notion. BT had done the same thing.

There are more benefits but the end of the day this purchase is crucial for AAPT. With a network in the arsenal it can start dealing blows of its own against Telstra and Optus. A fatter and richer telecom can only be good news for all of us in the form a better broadband network (hopefully a fibre optic one at that with this newly gained revenue). Its wishful thinking i know but they have no choice if they want to remain kingpin in NZ, so im going to remain cautiously optimistic this year through.


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  Reply # 59539 1-Feb-2007 20:39
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paradoxsm: Now they can buy Telstra's CDMA network!!!!








I wonder what this means, Strange Aq...


Explain? But over all it I agree with the above poster a good move by Telecom. Hopefully they will be able to turn this in to a success story unlike a raft of New Zealand companies who have tried to enter the Australian market and have come out second best.

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  Reply # 60140 8-Feb-2007 14:18
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Okay so the link you have just posted takes users to a hacks and cracks site.



BDFL - Memuneh
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Reply # 60141 8-Feb-2007 14:21
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