Does TPG Telecom Ltd want to buy Amcom Telecommunications Limited?

The plot thickens as Vocus Communications Limited (ASX:VOC), Amcom Telecommunications Limited (ASX:AMM) and TPG Telecom Ltd (ASX:TPM) continue to show interest in each other.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The fibre-optic future of Australia's internet network has taken some twists and turns recently as three key players on the scene make strategic moves designed to support their market positions.

It's worth paying attention to these three businesses as they sit in the middle of servicing two of the mega-trends of tomorrow. The explosion in demand for internet data fuelled partly by the growth in mobile devices, and the shift to cloud computing which relies upon high-performing fibre networks to service it.

With the core products to service this exponentially growing demand it's no wonder these businesses have been three of the ASX's best performers over the past few years.

Let's take a look at each one and what might be behind their recent strategic moves.

Vocus Communications Limited (ASX: VOC)

Vocus recently declared that it had increased its stake in rival fibre-optic internet business Amcom Telecommunications Limited (ASX: AMM) to 10% and also announced it wanted to merge with Amcom.

Vocus in announcing its intention to cement a merger stated that the two businesses assets and operations are complementary and combined would create a national player able to effectively compete with bigger rivals.

Since the announcement of Vocus' offer on October 27, Amcom's shares have jumped around 20%-25% indicating the market expects Vocus to pay a premium which would value Amcom at around $2.55 (or more) per share. To fund the deal Vocus would offer scrip in exchange for shares in Amcom.

Amcom Telecommunications Limited (ASX: AMM)

Amcom's board can agree to Vocus' overtures if it considers the deal is in the best interest of shareholders, or it can play hard to get if it believes it may receive a better offer from a rival.

Alternatively it could choose to create the best shareholder value by continuing to build its business alone. This possibility was evidenced by its recent acquisition of $15 million worth of fibre assets situated mainly around Australia's east coast from rival operator MegaPort.

Amcom has traditionally been a strong operator in Australia's west but the fact that it is now acting on its plans to head east and compete may strengthen Vocus' resolve to bring the businesses together.

TPG Telecom Ltd (ASX: TPM)

The third point in this fibre-optic love triangle is the big-hitting TPG Telecom which yesterday announced it had lifted its stake in Amcom to more than 5% just as Vocus was making its move on Amcom.

TPG stated that there is no specific intention behind the share buying other than as a strategic investment, although the timing does seem an unfortunate coincidence for Vocus.

It's possible to speculate that TPG's chief executive might not be keen on a hook-up between Vocus and Amcom and has decided to buy up shares in an attempt to lessen the possibility of it happening.

Alternatively TPG may in fact decide to make an offer to buy Amcom itself one day, with the prospect of a bidding war perhaps unavoidable if Vocus remains committed. Moreover, if Vocus is now forced to raise its bid for Amcom, TPG would make a substantial short-term profit as a handy consolation in return for facing a more powerful combined rival.

Amcom's shares have dropped more than 5% today to $2.37, although it seems premature to rule out an Amcom and Vocus merger just yet, with investors hedging their bets until further news.

Whatever the final outcome it's clear these three businesses have bright outlooks based on the big trends of the future.

Motley Fool contributor Tom Richardson owns shares in Vocus and Amcom. You can find him on Twitter @tommyr345

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »