M2 deal lets Primus shed US-tainted image

Being owned by a US company that was once declared bankrupt was holding Primus back from getting big business deals in Australia, according to CEO Tom Mazerski.

Being owned by a US company that was once declared bankrupt was holding Primus back from getting big business deals in Australia, according to CEO Tom Mazerski.

Tom Mazerski

Tom Mazerski
(Credit: Primus)

The chief executive, who PTGi brought over from the US to replace outgoing CEO Ravi Bhatia last year, said that up until now, there were areas of the market where Primus couldn't have won contracts because of its US parent PTGi.

"Especially like the Federal Government and some of the big hospitals, and some of the markets, we just could not penetrate. We'd always get the 'yeah buts'," he told the Communications Day 2012 summit in Sydney today.

Mazerski said that in contract negotiations, Primus would only fall short because it was owned by a US company, and one that had filed for chapter 11 bankruptcy in 2009. Although the filing didn't directly impact Primus in Australia, Mazerski said that the reputation had stuck.

Following the announcement yesterday that M2 Telecommunications would acquire Primus from PTGi for $192 million, he said that the company's 500 employees are happy to now be part of an Australian company.

"That all now goes away. Yesterday, we had a lot of high-fives. Our employees are jumping out of their shoes in that they're now part of an Australian company."

Mazerski said that the acquisition came about after a six-month global process, where Primus evaluated its business. He said that M2 and Primus would be a "match made in heaven", because while Primus is strong in the corporate sector, M2 is stronger in the small and medium business sector.

"What we do well, they don't; what they do well, we don't," he said. "Whenever you take two companies who do different things, but do them well and put them together, it's a very, very good thing."

Following Mazerski's talk, ZDNet Australia also spoke with M2's chief executive officer Geoff Horth, who said that M2's decision to buy Primus was fuelled by the need to acquire IP voice capability and hosting and managed service abilities, as well as acquiring the scale needed to move into the National Broadband Network (NBN) world.

"The consequence of this transaction is that it is the seventh- and eighth-largest telcos in Australia coming together to form the fifth largest. We'll have a revenue trajectory of around $680 million. That doesn't put us far behind iiNet," he said.

Horth said that the company expects around $5 million per annum of synergies between the two businesses once they are merged, chiefly from the networks and operations.

"We've got two different networks running side by side. When you put them together, it's got primary and redundant links, and you don't need four links. You get obvious benefits from bringing the 14 premises that they've got and the eight premises we've got together and consolidating," he said.

Mazerski said he also believes that there will be synergies in IT and billing. He said he doesn't plan on reducing headcount as a result of the deal, and Horth said that the acquisition isn't about reducing employee numbers.

"This absolutely is about creating a growth strategy; it's not about job losses."

Mazerski admitted that since he started at Primus, the company has reduced its headcount from 600 to 500, but this had all been natural attrition.

"I didn't fire anybody. Some people don't want to be there."

M2 has asked Mazerski to stay on as Primus CEO, he said, which requires him to give up his chief marketing officer role with PTGi global. Despite this, Mazerski is upbeat about staying in Australia.

"The fact that these guys asked me to hang around was nice, because I have unfinished business to do," he said.


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