Vocus $4B TPG bid shows appeal of fixed infrastructure

Australian long-haul fiber player Vocus has bid 6.3 billion Australian dollars (US$4.14 billion) for TPG Telecom's wholesale fiber business, demonstrating an appetite for fixed-line broadband assets.

In a stock exchange filing Tuesday, TPG confirmed the offer for some of its enterprise and wholesale fixed network assets, including the new Vision Network division.

TPG appointed financial advisers last October to carry out a strategic review of Vision Network, which it describes as Australia's biggest residential wholesale access network after NBN, passing 410,000 premises and with AU$100 million ($66 million) pro forma revenue.

The network comprises fiber to the building (FTTB), fiber to the premises (FTTP), fiber to the node (FTTN) and hybrid fiber-coaxial (HFC) technologies, including some of Australia's earliest deployment of G.Fast, TPG said.

TPG, Australia's third-biggest telco, reported earnings of AU$513 million ($337 million) and EBITDA of AU$2.1 billion ($1.4 billion) last year on total revenue of AU$5.4 billion ($3.6 billion). But it is trying to shed some of its AU$3.7 billion ($2.4 billion) in debt. Last year it sold off its mobile tower assets to Canadian pension fund OMERS last year for AU$950 million ($624 million) in a sale-leaseback arrangement.

Following the collapse of its mobile tower sharing deal with Telstra two months ago, it is also searching for a strategy for reaching mobile customers in regional Australia.

Another M&A driven by private equity

Vocus, a wholesale and enterprise specialist, runs Australia's second largest fiber network and has just opened the first international fiber link out of Darwin on Australia's north coast. It has expanded into mobile and satellite following the acquisition of enterprise LTE/5G provider Challenger Network and deals with Starlink and OneWeb.

The TPG bid is also yet another Asia-Pacific M&A driven by private equity. Vocus is co-owned by Macquarie Infrastructure and Real Assets (MIRA) and local superannuation fund Aware Super.

PE firms and funds have been behind many of the small to mid-sized M&A deals in the region in the past few years, including HGC in 2017, Vodafone New Zealand in 2019 and the acquisition of Vocus itself two years ago.

But this is not the only M&A in Australian telecoms this week. Superloop, another small, integrated telco, has made a AU$243 million offer for communications cloud service provider Symbio, one of its biggest wholesale customers.

The bid price of AU$2.85 ($1.87) per share is a premium of 19.7% over Symbio's closing price on Monday. Symbio's stock spiked 17% in trading on the ASX Wednesday. Superloop's stock closed 2.3% higher.

The Superloop board said in a statement the merger would create a larger and more complete telecommunications company encompassing data, voice and messaging. The two parties agreed a four-week period of exclusivity while they carry out due diligence.

Symbio offers white label billing, management services and messaging to telecom operators and cloud-based unified comms to enterprise customers. It has begun offering its services in Asian markets in the past 12 months.

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— Robert Clark, Contributing Editor, special to Light Reading