TECHNOLOGY SPECTATOR: Optus' vivid 4G future

The $230 million Optus acquisition of Vividwireless will allow the telco to seriously take on Telstra in the 4G market, while Target eyes an IT revamp.

Technology Spectator

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.

Optus, Vividwireless

Optus is in no mood to be left behind when it comes to the looming battle for 4G supremacy in Australia and the $230 million acquisition of Vividwireless Group from Seven Group Holdings is, if nothing else, a significant statement of intent.

Interestingly, the move comes a week after Canberra resolved the row with the major telcos with regards to the renewal of spectrum licences, in a deal that will raise about $3 billion over the next four years. Vivid has until now been the fourth player in the spectrum space but will now come under the Optus umbrella.

The immediate pay off is, of course, capacity, as Optus will gain access to up to 98MHz of spectrum in the 2.3GHz band, a band already used by some of the world’s leading operators to provide 4G services. The increase in capacity will help Optus strengthen its overall 4G network and take the fight up to Telstra, which started to roll out its Long Term Evolution or 4G network last year.

Optus said that it plans to use this spectrum to build a new 4G network using LTE-TDD technology which will deliver wireless broadband to households and businesses in metropolitan Australia with typical download speeds ranging from 25Mbps to 87Mbps. That’s twice as fast as existing competitive 4G services and exactly the sort of service that the telco wants to spruik in a highly competitive mobile market.

The new network will also be integrated with Optus’ 1800MHz 4G network, which is on track for an April launch in Newcastle and the Hunter region of NSW. The battle for spectrum will be a key focus for all mobile operators this year as the federal government gets ready to auction additional spectrum in November. In what is expected to be a highly competitive process none of the three carriers is expected to give an inch and Optus’ latest acquisition is a clear indication that it will be a serious player in that process.

Online makeover on the cards for Target

Diversified conglomerate Wesfarmers’ is evidently looking to boost the online presence of its discount department store business Target with the company looking for a general manager for its IT department. It is understood that Target's senior management wants to revamp the retailer's existing model after having a close look at the work done by overseas players like Tesco, Sainsbury and Burberry.

Wesfarmers’ half-year profit performance highlighted a weakness in Target which posted a 9.7 per cent dive in EBIT to $186 million. Its discount department store cousin Kmart on the other hand posted a 12.6 per cent rise to $197 million. Leaving aside the contrasting results for a minute the one thing that is clear is that it’s getting harder for the large mall-based retail chains to make a profit as consumer behaviour changes. Building a stronger and more streamlined online presence is a key factor that can make or break a retailer. With Kmart and Target struggling to co-exist in the same group there is talk that Wesfarmers may soon have to make a choice to keep one and ditch the other. I wonder if that speculation has some bearing on Target's plan to redefine its online presence.

Staying in the sector, Westfield and Groupon Australia have reportedly sealed a partnership that will see one of the world’s largest shopping networks join forces with the group buying giant. According to Inside Retailing, the ‘Groupon Powered by Westfield’ program, set to launch on February 29, will give users access to deals through both the Westfield and Groupon apps, with savings of up to 70 per cent on products and services offered by stores within Westfield’s shopping centres. The new partnership will coincide with the launch of online "deals and sales” hub

AFL spends big for online real estate

It’s been an eventful start to the year for the Australian Football League and while the legal battle with Optus over the telco’s TV Now is set to enter the next quarter the sporting code has now decided to secure a piece of expensive online real estate.

The AFL has applied to grab a personal internet domain (.afl) as part of what it calls a "long-term investment”, and it doesn’t come cheap. Lodging the application costs $US185,000 ($A173,578) and then there are the significant establishment costs and ongoing renewal fees, All in all, the start-up phase can set you back about $2 million and after that you are looking at an annual cost of another $2 million or so for the upkeep of operations and infrastructure.

It’s a big money play for big money players and the move begs the question whether spending all that moolah is really worth it. AFL general manager of strategy and marketing Andrew Catterall told media that the decision was focused on creating a "trust environment” within the AFL brand and "protecting the space". There is also the potential to create new commercial opportunities: providing fans with reliable and trusted content through multiple platforms, giving players and clubs their own sites and allowing sponsors to use the .afl suffix.

However, the main motivator is defending its online turf and, as Catterall points out, the full potential of the move is yet to be thought out. As far as fans are concerned there is an understandable antipathy to the move because, frankly, most of them are pretty happy with the way things are at the moment. When it comes to domains .com is still the king and is pretty much tattooed into our collective net surfing consciousness. AFL is taking a punt that’s going to change in the future and has decided to make its move early. Time will tell whether the millions are well spent, however one wonders if they would be better served by applying the same sort of foresight when it comes to broadcast deals.

Unfortunately, the latest comments from AFL boss Andrew Demetriou highlight the lack of progress on that front. Demetriou told the Herald Sun over the weekend that Optus’ product was tantamount to "stealing" and Optus subscribers should switch to Telstra. I have very serious doubts that users are going to change their telco provider purely on the basis of exclusive sporting content and the comments again show a remarkably blinkered understanding of the benefits of the TV Now product for the sporting body.

iSelect’s looming IPO

Going public in volatile global market conditions is never easy unless you are Facebook and the impending IPO of the social networking giant may prove to be the trigger for one of the biggest local floats of the year.

That local hero is none other than financial and insurance comparison group iSelect, and there have been a number of indicators that suggest things are going to get pretty interesting as the year unfolds.

The first significant marker is the reshuffle in iSelect’s executive ranks, with co-founder and former chief Damien Waller taking a step back from the day-to-day operations and focusing his energy on key strategic projects. No points for guessing what the number one strategic project is.

iSelect has promoted its corporate development director Matthew McCann to the role of chief executive and McCann told Technology Spectator that he was keeping a close eye on how the Facebook IPO plays out.

The other thing to keep an eye on is the situation at Nine Entertainment, which owns a 33 per cent stake in iSelect through ninemsn. Nine is certain to cash out on the stake, worth anywhere between $110 million and $150 million, as its owner CVC Asia Pacific gets ready to refinance $2.7 billion in senior debt by February 2013. And with talk that ACP Magazines is now well and truly on the block it’s only a matter of time before there is some sort of wheeling and dealing about who owns how much of the online infomediary.

As mentioned last year a successful sale by Nine will most likely leave Waller as iSelect’s largest shareholder with a 20 per cent stake. But we will have to see who might pick up Nine’s stake and at what price. There is a good chance that US private equity group Spectrum, which holds a 10.2 per cent stake in iSelect, will certainly have something to say on the proceedings and I won’t be surprised if it picks up a piece of Nine’s stake

UK dreams for crowdsourcing outfits

Local crowdsourcing outfits are spreading their wings in the UK with 99designs and DesignCrowd both announcing moves in the region. 99designs has launched its UK operations and has begun hiring staff locally as it looks to build a launch pad for its planned expansion into Europe. Meanwhile, DesignCrowd has also announced the launch of its own UK crowdsourcing service, The company said in a statement that the website will allow UK businesses to outsource or crowdsource design projects to DesignCrowd's roster of 60,000 designers from around the world. Interestingly, there’s also a UK-only service that enables businesses to crowdsource graphic design services exclusively from UK designers. DesignCrowd chief executive Alec Lynch said that the UK market was "ripe for crowdsourcing.” The company’s clients in the UK include HI-TEC and It’s been a busy three months for DesignCrowd which has not only launched its Australian service, secured $3 million in funding from Starfish Ventures, and bought US business

Apples’ Australian deal

Apple has signed a distribution agreement with Ingram Micro which will see it become the US tech giant’s second distribution partner in Australia. The distributor will offer Apple’s iPad, iPod and Mac product range, as well as accessories and AppleCare products to authorised resellers and retailers. Ingram Micro distributes Apple products in some 20 countries and the distributor has reportedly formed a dedicated team to service the Apple account in Australia. Apple’s other distribution partner in Australia is Simms International.

Wrapping up

In other news, Telstra has selected Varicent Software to provide a system that will manage the telco’s incentive compensation and sales performance management processes. The software firm has also appointed Keith Flanagan as the new Australian country manager.

Meanwhile, US-based data centre operator Digital Realty is set to spend $150 million to develop two new data centres in Melbourne. The facilities are scheduled to be completed by 2014 and are expected to generate $365 million in economic benefits. Victoria’s Minister for Technology, Gordon Rich-Phillips said the investment helps establish the presence of another strong international technology brand in Melbourne at a time when "the shift to cloud computing is driving the development of more and more large-scale data centres". Staying in Victoria, Kiwi web applications developer SilverStripe is setting up its Australian headquarters in Melbourne. The project is expected to create 50 new jobs over the next four years.

Elsewhere, Space Systems/Loral, the outfit building the two NBN satellites, has selected Siemens PLM’s Teamcenter offering as its product lifecycle management (PLM) platform. Implementation of the software will take place throughout 2012 and replace the satellite provider’s existing system. US-based virtualisation company Parallels has expanded its partnership with Australia’s third largest web service provider UberGlobal. Under the terms of the agreement, UberGlobal will deploy Parallels Automation software to deliver cloud services, including Infrastructure as a Service (IaaS), Platform as a Service (PaaS) and Software as a Service (SaaS). Finally, IT industry veteran Tony Henshaw has been appointed to the NICTA Board. Henshaw has spent over 35 years in the industry and held senior roles at Telstra, Unisys, EDS, Aspect Computing and Computer Power.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles