• Aussie Broadband has made a proposal to acquire Over The Wire for A$344 million, which if it goes through would make the combined company a top-five telco in the country.
• On the enterprise side there are lots of synergies, particularly with Aussie Broadband’s Carbon platform lining up with Over the Wire’s managed services capabilities.
Rapidly growing telco Aussie Broadband, made headlines last week when it made a non-binding offer to acquire business focused telco and managed service provider Over The Wire (OTW). After the leak both companies made official announcements to the ASX that an offer had been made to the tune of A$5.75 per share (equivalent to A$344 million). While both companies have clearly stated this does not mean a deal is imminent, and the official due diligence period will not come to an end until November 30th, the move makes a lot of sense and could create a real national level competitor in the enterprise telecoms and ICT services market, from the two upstarts.
Aussie Broadband has grown from 20,000 business NBN subscriptions and 1,600 white label/wholesale subscriptions at end September 2020 to 40,000 and 10,000 respectively at the end of this past September. The company has also decided on an ambitious fiber project that will see it construct its own 1,200km fiber network to connect directly to 86 of the 121 NBN PoIs (with a wholesale deal with Telstra connecting them to the rest), as well as enable it to provide its own fiber services directly to business in metro locations across the five capital cities. Beyond network connectivity the company has added SD-WAN from Cisco Meraki and managed firewall services from Fortinet to its Enterprise catalogue. The company also has an MVNO agreement in place to re-sell Optus 4G and 5G services which it also uses as a failover network in its enterprise internet plans.
While Aussie Broadband started as a consumer ISP, OTW started serving the business voice needs of Brisbane Enterprises. Since 2015 the company has been growing through a targeted acquisition drive, adding ten companies over the course of a five-year period that specialized in areas such as VoIP and PBX, network consulting and managed services, cloud hosting and migration services, and MPLS and SD-WAN. The company now has a core network that spans the five major capital cities and New Zealand. A VMware/VeloCloud SD-WAN solutions with PoPs in Brisbane, Melbourne, Perth, Sydney, and Auckland, and Tier 1 voice platform with interconnects with all major carriers that it claims rivals Telstra, Optus, and TPGs.
While Aussie Broadband is growing rapidly in selling NBN and network, with overall business revenues growing 87.5% in FY2021, OTW is growing in collaboration & voice and hosting services, growing 78% and 118% respectively in FY2021 (including organic and inorganic growth). Even in some areas where there might be product overlap, they are complementary in many ways. For example, Aussie Broadband offers Cisco Meraki for its SD-WAN solution, which is well suited for SMB and branch offices, while OTW offers VeloCloud, more geared toward enterprise.
However, the really compelling fit is between Aussie Broadband’s Carbon platform and OTW’s managed services capabilities. Aussie Broadband has developed a managed services platform that provides self-service ordering and provisioning, reporting, and testing and visualization tools. That said, the company does not specialize in managed services, instead offering the platform to businesses with their own in-house IT teams or to partners who want to use the platform to re-sell services. Meanwhile OTW offers managed services across PBX, collaboration platforms like Microsoft Teams calling, private and public cloud hosting, SD-WAN, security services, and even has professional services capabilities in areas like networking planning and cloud migration. The Carbon platform would be a perfect fit for OTW suite of services and would allow the combined entity to immediately become a full service network and ICT provider at a national scale. The combined enterprise focused revenues in FY2021 would stand at A$158 million at a time where both are still in the midst of a widescale expansion. If you combine Aussie Broadband’s consumer business, then they would stand at A$468 million, nearly half a billion, easily creating the fifth largest telco in the country. If the deal goes through, Australia’s largest telcos may need to worry about the new kid on the block.