Vocus to sell off New Zealand business

Australian Stock Exchange listed telco Vocus Communications is to sell its New Zealand business.

The plan was revealed in an investor update presentation on 23 October. Vocus said its board had determined that the Vocus New Zealand business would be prepared for sale with a view to competing the sale by June 2018. The company said it was finalising the appointment of advisors for the process.

It also announced that it would sell its Australian data centres and said the proceeds from both sales would be used to “materially reduce group debt levels, leverage ration and provide strategic optionality.”

The move to sell of the NZ business marks a significant about turn in strategy for the company, which has been going through troubled times.

When it announced its FY16 results it said that, following its merger with trans-Tasman telco group M2 in February 2016, it had set itself the goal of being “the leading challenger telco across Australia and New Zealand.”

The merged entity had a New Zealand staff of 700, three data centres, 4,600kms of inter-city fibre networks and a claimed 14 percent of the consumer broadband market.

The merger with M2 was the third in two years and when the company issued disappointing guidance in November 2016. Investors wiped $A874m from the company’s value in a single day.

In its investor presentation Vocus also gave a 1QFY18 trading update on its New Zealand business saying it had added 3365 broadband subscribers in the quarter and taken 16 percent of all UFB connections, taking the total to more than 50,000.

Vocus said it had 4,704 active energy customers and claimed to be the fastest growing energy retailer in Auckland.

Vocus’ energy services were launched in the quarter, targeting the SMB segment. Vocus said the opportunity for bundling was growing with the “energy attachment rate for new broadband customers” being 14.5 percent and for new mobile customers 13.3 percent.

During the quarter its business and government sector activities were restructured under the Vocus Communications brand and a general manager for the business segments appointed.

Vocus reported NZ revenues of $A322m, an EBITDA of $A57.5m for its NZ business in FY17. It has given guidance of high single digit percentage growth in revenue for FY18 and low single digit percentage growth in EBIDTA for FY18.