Two of the bigger stock price-moving stories recently are the acquisitions of New Zealand-based telecommunication and internet-service providers by entrepreneurial telco businesses based in Australia.
M2 Group Ltd (ASX: MTU) recently announced the intended $245 million acquisition of Call Plus, which is New Zealand's third largest internet services provider.
The deal means M2's debt burden will grow to around double financial year (FY) 2016's forecast earnings, but in exchange the acquisition is expected to be 15% earnings per share accretive.
M2 said the acquisition fits into its philosophy of disrupting and challenging the status quo in the national markets in which it operates, while it also fits into an acquisitive growth strategy that has delivered substantial returns to shareholders over the past few years.
The management team have a disciplined approach to costs and this should be applied to the Call Plus acquisition once it is in the fold. Overall stretching the debt profile to agree the deal seems reasonable provided M2 continues to deliver organic growth.
Another deal on the horizon in the mid-cap space is TPG Telecom Ltd's (ASX: TPM) proposed takeover of iiNet Limited (ASX: IIN). TPG has declined to offer any scrip in consideration for the acquisition and the $8.60 per share cash only offer may not be enough to persuade iiNet's institutional shareholders to accept the proposal.
Shareholders will vote to approve the scheme or not in late June 2015. If it does go ahead it's likely TPG's disciplined approach to cost management will be visited on iiNet's operations.
Another telco that recently announced a New Zealand-based acquisition is My Net Fone Limited (ASX; MNG), which operates primarily in the voice over internet space (VoIP), providing services to wholesale and retail customers.
My Net Fone will pay NZ$22.4 million to acquire the global wholesale voice business of Telecom International New Zealand. The acquisition is to be funded by bank debt and is at a cost of around 6.4x expected earnings of NZ$3.5 million before synergies and cost savings.
Of all the recent deals in the telco space this looks to have the real game-changing potential in my opinion. My Net Fone's ambition to go global in providing wholesale hosted voice services suggests it may be the start of a new chapter of acquisitive growth based on a lucrative global menu.
The stock has lifted around 30% since the acquisition was announced and looks an appetising option for growth-oriented investors.
