MNF announces AU$18m audio conferencing services company acquisition

Australian retail and wholesale voice-over-IP (VoIP) provider MNF has announced its acquisition of Conference Call International (CCI), a company that provides audio conferencing and collaboration services.

MNF will pay AU$17.5 million of the AU$18 million acquisition price in cash, with CCI to deliver around AU$3.5 million in earnings before interest, tax, depreciation, and amortisation (EBITDA) during FY17, a 17 percent increase year on year.

It is also expected to contribute AU$7.9 million in revenue to MNF's business, enterprise, and government customers and "network and operational synergies of AU$0.5 million", according to MNF.

CCI, which is headquartered in Melbourne with 23 staff members, provides audio conferencing and collaboration services to 5,000 business and enterprise customers across the APAC region, with 99.99 percent service reliability and the capacity to grow by 50 percent, according to MNF.

MNF said the acquisition, which will complete on February 10 providing the conditions precedent are met, would provide it with a new revenue stream.

"The acquisition of CCI provides MNF a significant entry into the audio conferencing and collaboration market in Australia and the region. These applications generate high-margin recurring revenues, with potential for consistent long-term growth and innovation potential," said MNF CEO and founder Rene Sugo.

"These applications are an excellent fit with the current MNF business, enterprise, and government sub-segment, as well as a high-value synergy with the group's domestic and global network assets."

MNF raised AU$18.6 million through a "heavily oversubscribed" institutional and sophisticated investor share placement at AU$4.50 per share over 4.13 million shares, and is now offering the same purchase price for eligible shareholders to raise an additional AU$3 million through a Share Purchase Plan (SPP).

The SPP will take place between February 7 and 21.

As a result of the acquisition, MNF is now forecasting that for FY17, it will achieve EBITDA of AU$23.7 million and net profit of AU$11.6 million -- up 33.1 percent and 28.9 percent, respectively, from its FY16 results.

MNF flagged that CCI also has "large network synergy potential" with its Symbio and Telecom New Zealand International (TNZI) brands that could lead to AU$500,000 annually in EBITDA savings.

In April 2015, MNF bought New Zealand telco Spark's international voice business, TNZI, for NZ$22.4 million. MNF in June announced the completion of this purchase after receiving approvals from the United States government.

TNZI sells voice, data, mobile, and digital services throughout Europe, North America, Asia, and Oceania.

In March last year, MNF then announced that it would be constructing a nationwide voice network in New Zealand through its IP voice communications provider Symbio Networks, which it will wholesale to service operators and over-the-top (OTT) providers.

MNF said it had identified a gap in the market left by New Zealand's bigger telcos, which are choosing to occupy themselves with growing their own retail networks rather than developing the wholesale layer to lease off to the many low-cost OTT operators that are entering the market.

Earlier this week, MNF also announced being signed on to the Victorian government's telecommunications panel.

MNF, which rebranded from its previous name of MyNetFone in late 2015, signed a mobile virtual network operator (MVNO) deal with Telstra Wholesale in October to push into 4G and 3G mobile offerings and offer its customers a "complete communications solution".

Mobile services are offered across its Domestic Wholesale business, with mobile services to be added to its Domestic Retail division later in FY17.

MNF operates in three segments: Australian domestic retail; Australian and New Zealand domestic wholesale; and global wholesale. For FY16, the first segment contributed AU$28.917 million in revenue, the second AU$30 million, and the third AU$110.275 million.

MNF's total domestic retail residential subscriber base was 109,000 as of June 30, 2016, with its DSL base declining to 13,504 services in operation (SIO) and its VoIP base declining to 91,369 SIO due to the migration of customers to the National Broadband Network (NBN).

Its mobile service operates across its proprietary iBoss platform, with Sugo last year applauding the NBN for having "stimulated" the mobile industry by pricing its connectivity virtual circuit (CVC) charge so high that it precludes smaller telcos from entering the fixed-line market, leaving mobile as the other big opportunity.

"With more consumers bypassing the NBN and turning to 'mobile only' as the alternative, we wanted to offer iBoss customers a go-to-market solution for reaching this growing consumer segment," Sugo said last year.

"For us, it's not just about selling the services. Our iBoss mobile enablement platform provides the deep integration, automation, and self-service capabilities to deliver a truly value-added solution that new market entrants are looking for."

MNF last year also expanded its London point of presence, completed upgrading the Los Angeles point of presence, and concluded the first stage of construction on the Hong Kong point of presence.

MNF was founded in 2004, and listed on the ASX in 2006. In July 2014, it acquired the business and platform of iBoss, a wholesale telco enabler, for AU$1.4 million.