Here’s why the 5G Networks (ASX:5GN) share price is zooming higher

The 5G Networks Ltd (ASX:5GN) share price is zooming higher on Thursday after announcing a new acquisition. Here’s what it is doing…

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The 5G Networks Ltd (ASX: 5GN) share price is charging higher on Thursday after announcing a new acquisition.

At the time of writing, the data network provider’s shares are up 4% to $1.63.

What did 5G Networks announce?

This morning 5G Networks announced that it has entered into a lease agreement for the ex-Pipe Networks Data Centre in Fortitude Valley.

According to the release, the company has agreed an all-cash consideration of $1.1 million, which includes all operating infrastructure at the facility.

Management advised that the acquisition will be funded from existing cash reserves, with a generous rent-free period on a 10-year lease.

It expects the facility to be operational January 2021, with the inclusion of the latest power redundancy equipment and cooling systems. Management notes that the data centre has the capacity to support 250 racks and access to 3MW of power on dual power grid, which offers the highest level of redundancy.

This acquisition means the company now operates data centres in each state on the east coast of Australia.

Why acquire this data centre?

Management advised that this strategic investment will allow 5GN customers to connect directly to the data centre via 5GN dark fibre once the new rollout is complete.

It notes that cross selling of infrastructure aligns with the company’s focused acquisition and growth strategy. It will also accelerate the continued execution of the 5GN wholesale channel strategy for infrastructure and data centre services.

5G Networks’s Managing Director, Joe Demase, commented: “We are really excited to be exploiting our advantage of being a DC operator and fibre network owner, I haven’t seen rack space and dark fibre product bundling from one provider before, but this is what our customers are asking for. It allows our partners to grow with a fixed cost model which also includes easy migration as a result of our 6-month rack offer.”

That offer will see rental charges waived and a complementary dark fibre cross connect to any data centre in Brisbane.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends 5G NETWORK FPO. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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