Amaysim forays into energy market with AU$120m Click acquisition

Budget mobile operator Amaysim announced on Monday that it is acquiring online pure-play energy retailer Click Energy for AU$120 million, as part of its long-term strategy to become the "remote control for the smart home".

Amaysim CEO Julian Ogrin said energy is the "most logical vertical" to complement the company's mobile and broadband products, and that the acquisition of Click reflects the telco's recognition of the opportunity for a "mobile virtual network operator (MNVO) of energy".

Ogrin told ZDNet that the merged companies will be able to "disrupt the larger incumbent 'gentailers' burdened with legacy systems and pricing structures" as both companies are "asset-light" and "online-led" with similar value propositions: low-cost, no lock-in contracts, monthly billing, and a DIY self-service platform.

"The energy business can be baked into Amaysim's plug-and-play multi-vertical platform to offer household customers a single place or 'remote control' to buy and manage their mobile, broadband, and energy plans with the touch of a button," Ogrin said.

The acquisition of Click -- which offers electricity in Victoria, NSW, Queensland, and South Australia, and gas in Victoria and NSW -- will add 136,000 households to Amaysim's 600,000-strong household customer base.

The company hopes an additional 300,000 households will subscribe to its broadband, mobile, and energy offerings in the upcoming years, at an average spend of AU$200 per household per month.

Amaysim expects to generate a combined pro-forma net revenue of AU$497 million and underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) of AU$55 million in the 2017 financial year.

It also expects the acquisition will boost its earnings per share by more than 20 percent for the year ending June 30, 2018, on an underlying profit after tax basis.

In addition, the acquisition is forecast to deliver annual pre-tax cost efficiencies of about AU$5 million by the end of the 2017-18 financial year, excluding one-off integration costs. The cost savings are expected to come from customer service, marketing, and IT integrations.

The Click acquisition is expected to be complete by June 2017 and will be funded through a combination of equity and debt, with AU$40 million of Amaysim scrip to be issued at AU$1.79 and the remaining AU$80 million to be funded through a Commonwealth Bank loan.

In addition to energy, the company is also looking to enter the NBN market in 2017, as supported by its acquisition of Australian Broadband Services, with the telco paying AU$1 million in cash and AU$1.5 million in shares upfront in August last year.

"We expect to hit the ground running as we focus on the forced household migration with the NBN rollout and we will be looking at offering an Amaysim-branded energy product by the second half of the 2018 financial year," Ogrin told ZDNet.

"For the time being, we are focused on launching our suite of NBN plans in the coming weeks and successfully growing this business, and we will look to integrate Click into the Amaysim business over the next 12 to 24 months."

Ogrin said Amaysim will extend its dual-brand strategy -- which it claims has been a cornerstone of its business since its AU$70 million acquisition of Vaya in January last year -- to fixed-line broadband.

He told ZDNet at the time that Amaysim plans to differentiate its NBN offering by providing customers with assistance during their broadband switchover, including in completing tasks like finding electricians.

For the six months ended December 31, 2016, Amaysim's underlying EBITDA was AU$17.3 million, up 38 percent from the previous corresponding period.

The telco reported half-year net revenue of AU$136.6 million, up 17 percent from the previous corresponding period, while its net profit after tax increased 29 percent to AU$10.3 million.

In its half-year financial results, Amaysim also revealed its average revenue per user (ARPU) dropped 15 percent to AU$22.37. However, the company said its ARPU was "consciously repositioned" by providing subscribers with competitively priced products.