M2 to acquire New Zealand ISP Call Plus

ASX-listed telecommunications provider M2 will acquire Call Plus, New Zealand's third largest ISP, for $245 million, the company announced this morning.

M2 has entered into binding agreements to acquire 100 per cent of Call Plus Group as well as associated SMB VoIP provider 2Talk.

In addition to 2Talk and Call Plus the company operates Call Plus Business and consumer brands Slingshot and Orcon.

In total Call Plus operates more than 400,000 consumer, business and wholesale services.

M2 CEO Geoff Horth said that Call Plus would be maintained as a "self-contained" business and the existing management team, including CEO Mark Callander, would continue to lead the business.

"We've had an association with them for five or six years via our Black and White business; it has been our primary wholesale supplier [in New Zealand]," Horth told an investor briefing this morning.

"Through that process we have managed to get a very good understanding of the business, develop very strong relationships with the owners and in particular the management team. And we've, from a distance, been extraordinarily impressed with this business."

"It is a business that is highly profitable and complementary, with a similar challenger culture to M2," the M2 CEO said.

"It's a disruptor and it's a business that is very focused on its key metrics of cost to acquire and cost to serve and is not only... commanding a good share of the broadband market today, but is I think out-indexing its competitors in terms of taking share on go-forward basis in both the traditional copper broadband market and also with the rollout of the Ultra-Fast Broadband market in New Zealand," Horth said.

M2 expects the acquisition to contribute more than NZ$250 million (AUD$246 million) revenue and NZ$45 million EBITDA in FY16.

A statement from M2 on the acquisition said there was "strong cultural alignment" between the businesses and that Call Plus targeted the same markets in NZ that M2 does in Australia.

M2 expects to complete the acquisition before the end of the financial year. The transaction is subject to approval from New Zealand's Overseas Investment Office.

Horth said he didn't "envisage any impediments to that approval".

In February M2 reported revenue of $546.2 million for the six months to the end of December, up 8 per cent on the same period in 2014. Net profit after tax (NPAT) for the half was $38.5 million, up 25 per cent.

Copyright © 2015 IDG Communications, Inc.

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