Tech Deals is a weekly column covering the latest deals in one of the busiest sectors for M&A. To read previous articles go to our Tech Deals page.
Leighton’s golden telco sale
It may have taken some time but Leighton Holdings has finally found a suitor for its telco assets. And to top it all off, the construction giant is getting a price that’s well to its liking. Provided the $885 million deal crosses the final hurdle, the Canadian-based Ontario Teachers' Pension Plan (OTPP) will end up with a 70 per cent stake in Leighton’s NextGen, Infoplex and Metronode telco assets, giving Leighton the ammunition it needs to lighten its debt burden.
Things didn’t exactly look this rosy at the start of the process with lingering doubts that a lack of competitive tension would deliver a lower than expected windfall for Leighton. However, those concerns have been allayed for now with the Canadians beating the likes of TPG to the table.
OTPP isn’t exactly a stranger to Australian shores and its antipodean ventures have so far seen it buy (and subsequently sell) a stake in Transurban, as well as acquire sizeable stakes in Macquarie Airports and the Sydney desalination plant. With over $1 billion invested in Australia OTPP’s latest gambit sees it target telco infrastructure which independent telco analyst Chris Coughlan says provides a safe destination for those looking for an asset that guarantees returns.
According to Coughlan, the combination NextGen, Infoplex and Metronode will act as an effective tier 2 provider for NBN services when the network is rolled out.
Given that the Coalition won’t repeal the NBN, the service is almost guaranteed to give OTPP a “stable return,” Coughlan says. He adds that, as it stands, the deal won’t have much impact on Australia’s telco landscape. That is, unless it spurs other bidders into action.
The big surprise is that TPG has decided against upping ante despite the fact that the Leighton assets, especially NextGen, would be a perfect fit for the telco to expand its fibre footprint and backhaul capacity. It could have another stab provided OTPP and Leighton somehow fail to reach a final agreement but the prospect of that seems highly unlikely.
OTPP clearly has the firepower to outmuscle any rival when it comes to price and the TPG boss David Teoh has once again lived up to his reputation of being a disciplined operator when it comes to spending. This was a fight that TPG would have found hard to win and Teoh has quite rightly decided that discretion is the better part of valour in this case. As for Leighton, it can sit back, relax and be content in the fact that the process of offloading its telco assets has proved to be far more fruitful than it would have imagined.
Can Telstra really be a budget ISP?
Staying in the telco space, Telstra’s game-changing move to acquire low-budget ISP Adam Internet is seemingly stuck in a limbo as The Australian Competition and Consumer Commission (ACCC) continues to mull over the deal.
The move to acquire the South Australian company started last October, and has led to more than one impassioned plea from a chorus of Telstra’s rivals to the ACCC. So far, Telstra’s ambitions for a budget arm has raised familiar concerns about the telco abusing its power to give its wholesale customers a raw deal.
However, not everyone is convinced that the deal would see Telstra favour Adam over its other customers. The contrarian stance comes from Exetel’s CEO Steve Waddington who reckons the deal may actually spur competition. Waddington has told ZDNet that he thinks the deal should go through
"In my view, the ACCC has it the wrong way around. Say Telstra do use Adam as a low-price vehicle, what does that mean? It means that there is another low-price ISP in the market, so more competition," Waddington told ZDNet.
He added that even if the ACCC approved the deal, Telstra’s governance would see the ISP eventually lose its cost benefits or its local focus anyway.
So a Telstra-Adam budget arm may not be so “budget” after all and Waddington is also perhaps pragmatic enough to sense that ACCC’s disapproval won’t scuttle Telstra’s overall ambition.
Sure, the ACCC can stop an acquisition, but it can’t stop the telco perhaps poaching some of Adam’s staff and starting its own Telstra sub-brand.
All systems go for Jabiru 1
NewSat’s satellite project Jabiru1 has taken another significant step towards launch date, with the company managing to raise the $611 million in capital it needed to send its creation - Australia’s first KA-band satellite - into space.
The funding success culminates the latest round of funding - which came after the company went into a trading halt last November - NewSat raised $105 million in funds from shareholders and $30 million in mezzanine funding from an “sophisticated” investor in Singapore.
It’s all good news for NewSat. It’s customer and funding pipelines seems to keep growing and the satellite’s construction and launch is running on schedule. Expect to start stargazing for Jabiru1 sometime in 2015.
Optus broadens M2M services
Optus has broadened its Machine to Machine (M2M) services offering with the expansion of its agreement with Jasper Wireless.
As a result of the deal, Optus Business will now offer Jasper Wireless’ M2M control centre as part of its portfolio. Optus says the service will give its customer greater flexibility when managing and controlling their M2M service.