TPG Telecom has provided its strongest indication yet that it is preparing to take on Australia's dominant internet players, finalising a $450 million deal to buy AAPT's business and wholesale divisions from Telecom New Zealand.
The deal includes AAPT's 11,000-kilometre fibre-optic cable network. The network extends across six states and territories and connects large capital cities.
Investors reacted positively to the deal as TPG shares surged as much as 16 per cent before finishing the day 13.6 per cent higher at $4.68.
"The incorporation of AAPT's inter-capital fibre into TPG's extensive CBD, metropolitan and international network assets will further enhance TPG's position as an increasingly major force in the telecommunications market," TPG executive chairman David Teoh said.
Along with AAPT's fibre access to 1500 buildings, Mr Teoh said, the acquisition would give TPG a solid fixed-line asset as it looks to expand its wholesale and business divisions. The sale comes as TPG plans to roll out fibre-optic cables to half a million apartments across Australia.
TPG is trying to take advantage of the change in broadband policy under the Coalition, expanding its existing fibre network into the basements of apartment complexes in some large cities.
"We will have to see what the Coalition policy will be. We will just focus on our business," Mr Teoh said.
"We are still learning, we are quite young in the marketplace, but we definitely will increase our market share, but the important thing is to open up to the wholesale market as well."
The Coalition has indicated it will abandon Labor's national broadband network policy of connecting fibre to every home, in favour of using fibre-to-the-node, wireless and other technologies.
The purchase of AAPT will give TPG access to more than 100 of the NBN's 121 points of interface, the physical location where two carriers meet, reducing the company's reliance on other carriers.
"David Teoh has got a pretty impressive track record as a businessman. You look at TPG, they're the only ISP that's been able to grow organically," Moelis Securities analyst Adam Michell said.
"TPG has got itself a very robust presence in the value end of the spectrum and I would imagine that that value perspective could easily be overlaid onto a fibre network."
In November, Telstra's head of wholesale, Stuart Lee, had argued that TPG's plan to connect 500,000 homes with fibre to the premises would undermine the NBN
Mr Lee said that the NBN business model ran on the assumption there would be a flat rate national pricing and TPG's move would cherry-pick the country's most profitable internet users.
But Moelis' Mr Michell said it would only provide increased competition.
Bought at the height of the dotcom boom, AAPT was acquired in 1999 for $2.2 billion, marking a more than $1.5 billion loss for New Zealand Telecom.
In 2010, New Zealand Telecom sold AAPT's consumer division to iiNet for $60 million.
The sale comes in at about 6.4 times AAPT's annualised earnings before interest, taxes, depreciation and amortisation of $70 million.
In the year to the end of June, AAPT reported a 15 per cent fall in EBITDA to $57 million.