Superloop acquires broadcast media network for AU$3m

The dark fibre provider led by Bevan Slattery is acquiring media network company Cinenet, hoping to enter the US market and the digital media industry.

Asia-Pacific fibre infrastructure company Superloop has announced the acquisition of Cinenet Systems for AU$3 million, with the broadcast media network to provide Superloop with an avenue to enter both the media industry and the US market.

The AU$3 million acquisition will consist of AU$1.5 million in cash and AU$1.5 million in Superloop scrip.

Cinenet, established in 2003, owns a high-speed broadband network specifically for use by the broadcast and media industry. It delivers wide-area network services to customers including movie studios, producers, editing facilities, sound facilities, visual effects providers, and DVD producers across Sydney, Melbourne, Brisbane, Adelaide, and Los Angeles.

The media companies use the network to create, exchange, and access large digital files and data sets, connect to datacentre and cloud providers, and use video streaming, VoIP, and collaboration tools.

Some of the productions carried out on Cinenet include the Harry Potter series, Lord of the Rings: Return of the King, X-Men Origins: Wolverine, Batman Begins, The Great Gatsby, The Hunger Games, and Terminator: Salvation.

Cinenet will continue as a brand underneath Superloop, with its CEO and executive director Tony Clark to join Superloop as a non-executive director.

"The acquisition of Cinenet provides Superloop an opportunity for the company to quickly expand its network capabilities into the fast-growing digital media vertical, which is currently experiencing massive growth," Superloop CEO Daniel Abrahams said in a statement.

"Furthermore, the Cinenet acquisition brings a great portfolio of customers and establishes an international gateway for Superloop and our customers in the United States."

In return, operating within the Superloop portfolio will allow Cinenet to improve its network coverage across Asia-Pacific.

"Joining the Superloop group allows Cinenet to continue to provide services to our existing customers, with the ability to access increased network and datacentre coverage across the APAC region," said Clark.

Superloop, which was founded by Australian technology entrepreneur Bevan Slattery in 2014, only listed on the Australian Securities Exchange (ASX) in June after a successful IPO wherein it raised AU$17.5 million through more than 2,300 investors.

The company was created when Megaport's fibre assets were spun off so that Megaport could return its focus to expanding its layer 2 elastic connectivity platform outside of Asia and Australia.

Superloop's 130km fibre network in Sydney, Melbourne, and Brisbane was subsequently sold off to Amcom. In return, Superloop secured a 15-year exclusive lease on the network, which services such customers as iiNet, M2, and Anittel.

With both streaming video and subscription TV predicted to continue growing substantially, Slattery said the Cinenet acquisition will allow the company to enter the lucrative digital media industry, with Cinenet projected to bring in revenues of AU$2 million for FY16.

"Digital media is one of the key growth industry verticals that Superloop has identified for opportunity given the massive growth in video consumption," Slattery said.

Superloop released its first annual results report in August, recording a net loss of AU$1.19 million due to the costs of developing the new business and expanding its fibre-optic network across Australia, Singapore, and Hong Kong, as well as a lack of customers.

The company also reported underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) at a loss of AU$3.55 million. Given the continued roll out of its networks, customer revenue was not recorded; however, the company made revenue from interest income on deposits held, which amounted to AU$7,217.

In Singapore, the company acquired and has been installing a 120km duct network underground, with a fibre optic network also currently being rolled out to connect datacentres and submarine cable landing stations.

The Superloop (Hong Kong) subsidiary was also granted a Unified Carrier Licence (UCL) by the Hong Kong Office of the Communications Authority in August, with Abrahams stating that this would enable the company to provide the Chinese territory with fixed-line telecommunications services.

Abrahams said in June that the dark fibre company would be targeting telcos and content providers in Asia Pacific, predominantly in Singapore, with the swell in subsea cables and datacentres a major drawcard for the region.

Earlier on Monday, the company Superloop was spun out of announced its IPO, with Megaport hoping to raise AU$25 million in a bid to list on the ASX and expand its services across the US and Europe.

Under the IPO, 20 million shares are being offered at AU$1.25 per share, with Megaport saying the IPO and ASX listing will help the company continue to grow overseas.

"To achieve our vision, we plan to extend the platform deeper into existing markets and expand into new markets, particularly key markets within North America, Europe, and Asia. The capital raising under the IPO helps the business accelerate those plans," said Megaport CEO Denver Maddux.

Megaport, founded in 2013 by Australian technology entrepreneur Bevan Slattery, provides end-to-end network connections through 34 datacentres across Australia, Singapore, New Zealand, and Hong Kong to business customers.

Megaport now has more than 200 customers, and is an Amazon AWS, Microsoft Azure ExpressRoute, and Google Cloud Interconnection partner. It aims to expand its business into 45 datacentres across Europe and North America in 2016.

The Cinenet acquisition is scheduled to be complete by November 30.