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More Oz Telecoms Mergers Tipped As Vocus, M2 Link Arms

More Oz Telecoms Mergers Tipped As Vocus, M2 Link Arms

The Vocus-M2 deal if approved will create Australia’s fourth-largest telco behind Telstra TPG and Optus. It will also become the third-largest operator in New Zealand with a combined market value of more than $3 billion.

Cost savings of around $40 million a year are expected to flow from the merger which must first get green lights from M2 shareholders the courts and regulator ACCC.

Independent telco industry commentator Paul Budde told CDN more mergers are now inevitable in the current telecoms market

“It has become a utility market with cut-throat prices” he told us by e-mail from Rome. 

“Size does matter a great deal here.  The key decision customers make is based on price. Differentiating on other aspects can only be done as long as you stay competitive.”

He added: “Competing with TPG will be a big task as they are the price competitor in the market and at the same time they are able to also be very profitable – a very hard task to follow.

“Yes I do expect more mergers – however the ACCC has indicated they don’t like the Big Three to merge further between them. It will be interesting to see if they can maintain that position .”

M2 has been quietly building via a series of takeovers and mergers over the years and its brands now lude Dodo Commander and iPrimus all at one stage fiercely independent

The new deal will see M2 holding around 56 percent of the combined and Vocus having the remaining 44 percent. 

The combined group’s market cap is estimated at more than A$3 billion.

The partners said they expect the new entity to have diverse product offerings luding retail Internet; retail electricity and gas; corporate Internet and IP voice; wholesale Internet and IP voice; datacentre and cloud services; international and domestic bandwidth; and dark fibre.

M2 chief executive Geoff Horth is expected to be appointed CEO of the merged group. Vocus founder/CEO James Spenceley will become a boardroom executive director. Vocus chairman David Spence well remembered as CEO of the late great Unwired operation as well as current PayPal Australia chair will be chair of the new board of eight directors – four from each current company. 

 M2 shares closed +$1.30 or 13.42 percent at $9.55 on the ASX yesterday. Some 3.97 million shares changed hands.