With the rollout of the National Broadband Network (NBN) expected to ramp up in the coming years, Amaysim Australia plans to enter the local broadband market, and has marked the decision with the acquisition of Australian Broadband Services (AusBBS).
While the transaction remains subject to the satisfaction of customary conditions precedent and is expected to occur in late August 2016, it will see Amaysim pay AU$1 million in cash on completion; AU$1.5 million in Amaysim shares on completion, where 50 percent of shares received by AusBBS key personnel will be escrowed for six months; and AU$1.5 million in Amaysim shares one year after completion, which will be subject to customary warranty claims and the successful integration of AusBBS' proprietary platform into Amaysim's business.
The parties have also agreed to a maximum earn-out of AU$5.45 million payable in cash and Amaysim shares. Amaysim pointed out the earn-out is subject to minimum and maximum targets in respect of subscriber growth and profitability, which will be be measured and paid at the end of the second and third years after completion.
In addition, AusBBS' team of three, including Rob Appel, CEO and major shareholder of AusBBS, will join Amaysim as employees on completion of the transaction.
AusBSS was launched in 2012, and has developed a cloud-based platform from ADSL and NBN provisioning and subscriber management.
"For the past four years we have focused on creating the most flexible, scalable, and efficient platform possible to deliver broadband services in the context of the migration to fibre networks in Australia. Our cloud-based approach ensures that the business can adapt to new opportunities quickly," Appel said.
Amaysim has described its decision to enter the broadband market as a "natural extension" to its existing business, saying it will answer the "ongoing requests by many of Amaysim's mobile subscribers for the company to provide broadband services".
"It is logical for Amaysim to enter the broadband market in the next 12 months, to take advantage of the likely customer switching behaviour that will stem from the continued NBN rollout," Amaysim CEO Julian Ogrin said.
"Acquiring AusBBS' technology platform is a great way for us to accelerate our broadband strategy, become even more relevant in data-hungry Australian households and bring our 'less hassles' approach to broadband."
According to Ogrin, Amaysim plans to launch its broadband offerings later this calendar year.
"Amaysim expects to grow its broadband subscriber base while maintaining its low cost of acquisition and low cost to serve. Amaysim is also expecting to benefit from reduced churn through bundling and new opportunities to sell products 'in the home'," the company said.
Earlier this year, the telecommunications provider revealed a 96 percent drop year on year in net profit from AU$17.1 million to AU$681,000 for the first half year results of the 2016 financial year.
Amaysim attributed the profit plummet to network related expenses, as well as the costs associated with its AU$70 million acquisition of Vaya and initial public offering (IPO).
Ogrin at the time said the results proved the company was "driving sustainable, profitable growth in a dynamic and competitive market".