Vodafone NZ to buy rural broadband provider for NZ$10m

Spark's attempts to acquire TeamTalk have been blocked by the latter's shareholders approving Vodafone NZ's 70 percent acquisition of Farmside for NZ$10 million.
Written by Corinne Reichert, Contributor

Vodafone NZ's majority acquisition of Farmside, the rural broadband and satellite arm of small carrier TeamTalk, will proceed thanks to an "overwhelming" shareholder vote on Wednesday morning, with the sale blocking competitor Spark's attempts to acquire TeamTalk in its entirety.

Vodafone NZ will acquire 70 percent of BayCity Communications, which trades as Farmside, for NZ$10 million in cash.

Vodafone NZ already has a mobile virtual network operator (MVNO) deal with Farmside, which also offers rural broadband services and is one of the largest resellers of the New Zealand government's Rural Broadband Initiative (RBI).

It uses satellite, ADSL, and wireless technology to provide internet connectivity in regional areas, and has a contact centre in Timaru with over 70 staff members.

"This is an opportunity to deliver better outcomes for rural customers, to increase our presence in the rural broadband market, and to utilise the skill sets of the two complementary companies," Vodafone NZ CEO Russell Stanners said on Wednesday.

"The investment by Vodafone in Farmside further deepens the strategic relationship between ourselves and TeamTalk. There are other opportunities for us to partner, for instance sharing fibre including future upgrade and maintenance costs."

The news means an end to the acquisition attempts by Spark, which last week said its 80-cents-per-share acquisition offer for TeamTalk would lapse should shareholders vote in favour of selling off a majority of its subsidiary Farmside to Vodafone NZ.

"Spark New Zealand has noted the shareholder vote at today's TeamTalk special shareholder meeting to approve the sale of a 70 percent shareholding in Farmside," Spark said in a statement.

"As previously advised, Spark New Zealand will not waive the remaining conditions of its offer to acquire TeamTalk, thus its offer to acquire 100 percent of the shares in TeamTalk has now lapsed, and shareholders are no longer able to accept Spark's offer."

TeamTalk had last month announced that it was encouraging an offer from Vodafone NZ to acquire 70 percent of Farmside for NZ$10 million in cash as well as the option to acquire the remaining 30 percent for NZ$3 million -- a day after urging its shareholders to reject Spark's "predatory" and "exploitative" takeover offer.

TeamTalk had said it obtained an independent assessment from Grant Samuel showing the Spark acquisition offer undervalued the company's value by between NZ$22.8 million and NZ$39.6 million.

According to TeamTalk, its current business plan, which is being led by a new CEO, CFO, and transformation officer, will lead to "strong profitable growth".

TeamTalk provides digital mobile radio services, including point-to-point digital microwave radio services, and holds more than 90 percent of the trunked radio market, with 450 high sites and spectrum.

Through its brand CityLink -- the main asset targeted by Spark's acquisition proposal -- TeamTalk has a 270km fibre network throughout streets and 70km in buildings across Auckland and Wellington; a free Wi-Fi service in Wellington, which is subsidised by Wellington City Council; owns datacentres in Wellington and Auckland under the brand SiteNet and rents out rack space to customers; provides peering exchange services through ExchangeNET, which has exchanges in Auckland, Wellington, Christchurch, Hamilton, and Dunedin; and provides custom networks within six cities across the country.

Spark said it would "seek alternative options" to attain a fibre network throughout the Wellington CBD.

The New Zealand regulator had been due to make a decision on Spark's acquisition of TeamTalk by May 22, after saying it intended to look into conglomerate and vertical merger issues.

The two carriers also recently butted heads over Spark's attempts to merge with pay TV provider Sky TV, which was ultimately declined clearance by the New Zealand Commerce Commission last in February due to the competition issues in the mobile telecommunications and broadband markets mainly over the issue of premium sports content ownership.

After continually accusing Vodafone NZ and Sky TV of trying to squeeze the competition out of the wholesale premium live sport and entertainment content market, the retail residential fixed-line broadband market, the retail mobile broadband market, and the pay TV market, Spark even took the matter to the High Court, which ruled that there would be a short-term delay if the merger were to be approved.

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