Amaysim acquires Vaya for AU$20m, inherits AU$50m Optus debt

Telecommunications provider Amaysim has acquired mobile virtual network operator (MVNO) Vaya for a total of AU$70 million, to be paid by AU$5 million in cash, AU$15 million in Amaysim scrip, and assumption of Vaya's AU$50 million liability to Optus.

"The Vaya Group presents an attractive and financially compelling opportunity to advance our strategy for profitable growth," said Amaysim CEO Julian Ogrin.

"The transaction will build on Amaysim's position in a consolidating market, enhance the company's scale, and leverage its online platform."

The scrip is subject to escrow arrangements, and will be paid over a period of 12 months, while the cash will be paid on completion of the deal. The debt to Optus will be paid through use of existing cash reserves and Amaysim's future cash flow over the 24 months beginning February 2016.

Amaysim attributed the acquisition to wanting to reach the sub-AU$20 market through a dual-brand strategy. Amaysim will also be able to make use of Vaya's overseas contact centre.

"Vaya's online-only, strong market offering in the sub-AU$20 market segment complements Amaysim's 'customer champion' position, and creates greater scale to our online-driven platform and operating network," Ogrin said.

"I am very happy that the acquisition will present immediate value for Amaysim shareholders. This is a rare opportunity to significantly grow our number of subscribers on the same network and in a complementary market segment."

While Vaya's customer base is forecast to continue growing, Amaysim acknowledged that the company's FY16 earnings will make only a "minimal contribution" to Amaysim's FY16 earnings before interest, tax, depreciation, and amortisation (EBITDA), but should be "materially accretive" by FY17.

Vaya, which operates under the Vaya, Live Connected, and Zen Connect brands to resell Optus' 4G Plus network over mobile services and fixed-line broadband, has a customer base of approximately 140,000, according to Amaysim, with an average revenue per user (ARPU) of AU$22 and 2.7 percent churn.

Its cheapest mobile plan offers unlimited text messages, AU$650 worth of calls, and 1.5GB of data for AU$18 per month, while its top-tier "unlimited" AU$44 plan grants unlimited calls and text messages, plus 6GB of data each month.

In November, market research company Kantar revealed that the rise of MVNOs in the no-contract market has led to incumbent telco Telstra falling overall in market share due to a drop in its post-paid customers.

"Cheaper calls, followed by better customer service, are cited as the key reasons for changing networks ... noteworthy beneficiaries of the Telstra churners are Amaysim, TPG, and iiNet," Kantar said.

Amaysim came in fifth place for the overall mobile market, at 3.8 percent share, up 0.1 of a percentage point year on year behind Telstra, Optus, Vodafone Australia, and Virgin. Other MVNOs accounted for 9.7 percent of the total market, a rise of 2 percent year on year.

In the no-contract market segment, Amaysim gained 1.4 percentage points, to account for 8.7 percent of the market, and in the post-paid sector, Amaysim stayed fairly level, losing 0.1 percentage points to retain 1.4 percent of market share. For the prepaid market, Amaysim dropped to 5.8 percent.

Kantar in April similarly recorded a jump in the no-contract market, up 2.1 percent quarter on quarter to 9.5 percent of the total market.

"Australian consumers are becoming increasingly exposed to the benefits of SIM-only tariffs, which offer 4G connections, rollover data, no lock-ins, and a generous amount of data, to name a few, for a comparatively low cost," Kantar said at the time.

The MVNO sector is continuing to grow, with Kogan Mobile relaunching in October on the Vodafone network.

Vaya itself has come under fire of late, however; in October, the Australian Telecommunications Industry Ombudsman's (TIO) Annual Report 2014-15 revealed that Vaya's complaints statistics increased substantially. Over the year to June 30, 2015, Vaya saw its complaints increase by a whopping 288.4 percent, from 421 to 1,635, due to excess charges, disputed bills, and failed data usage notifications.

The MVNO noted, however, that its customer base had increased by 174 percent over the last two years, which may have contributed to the increase in complaints.

For the July to September quarter, both Vaya and Amaysim were noted as having recorded more than 25 complaints to the TIO.

In December, Vaya was also found by the Australian Communications and Media Authority (ACMA) to be non-compliant with the Telecommunications Consumer Protections (TCP) Code by charging customers a AU$20 security deposit before providing services.

The February 2015 policies of both Vaya and its brand Live Connected required customers to provide a security deposit, to be debited with their next monthly bill, in order to ensure customers paid for the service they were using.

This contravened the TCP Code, which states that service providers are only permitted to request a security deposit following an individual credit assessment in relation to the specific product being purchased by the consumer. Neither Vaya nor Live Connected carried out these credit assessments.

"This finding sends an important message to the telco industry that security deposits cannot be unilaterally imposed on all customers," said ACMA chairman Chris Chapman.

Vaya acceded to the ACMA's finding, agreeing that it would no longer take security deposits without first undertaking a credit assessment.

Amaysim filed for its initial public offering in June last year.