What: The $9 billion telecommunications group TPG Telecom Ltd (ASX: TPM) is set to issue more shares with the stock entering a trading halt pending a $300 million underwritten equity raising by way of a bookbuild.
According to the company's release, the equity raising will involve a placement of shares to institutional investors which will be underwritten by a division of Macquarie Group Ltd (ASX: MQG) and is intended to be followed by a share purchase plan (SPP) which will allow eligible shareholders to apply for up to $15,000 worth of new shares.
So What: The stated reason for tapping investors for cash is to partly repay debt in order to support ongoing growth capital expenditure initiatives including the recently announced fibre network build for Vodafone Hutchinson Australia, as well as to reduce the overall cost of funding.
The move comes just weeks after TPG completed its takeover of peer iiNet Ltd, cementing its position as a major rival to dominant telco Telstra Corporation Ltd (ASX: TLS).
Now What: The second tier mid-cap sector has seen significant merger and acquisition (M&A) activity this year with momentum running hot.
The share price of TPG is up close to 50% in the past year while M2 Group Ltd (ASX: MTU) has gained nearly 30%.
In other telco sector news Vocus Communications Limited (ASX: VOC), which early in the year merged with Amcom Telecommunications Ltd and was recently given the green light to merge with M2 Group, has responded to a report in the Australian Financial Review by confirming that it has signed a non-binding term sheet with 50%/50% joint venture partner Nextgen Networks to build a 4,600 km cable connecting Australia to Singapore and Indonesia.
The project is estimated to cost US$120 million, take approximately 18 months to complete and provide the first 100Gbit/ second high-speed connection between Australia and South-East Asia.