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M2 to buy Dodo for AU$204m

M2 has announced plans to buy out the smaller internet service provider Dodo for AU$203.9 million
Written by Josh Taylor, Contributor

M2 Telecommunications group has announced plans to buy out Dodo for AU$203.9 million, as well as a potential takeover of Eftel.

M2 said it would acquire Dodo and its over 400,000 customer base by May this year. The company said that the Dodo business is "highly complementary to M2's existing sizable consumer division", which includes Primus, a telco that the company took over last year for AU$192 million.

Dodo is privately owned; however, Dodo co-founder Larry Kestelman is a director for Eftel and owns a significant stake of the company. M2 said that Dodo and Eftel directors collectively own an 88 percent stake of Eftel. The company has proposed buying out Eftel for a value of close to AU$44.1 million, but the buyout is not conditional on the acquisition of Dodo.

Dodo co-founders Kestelman and Michael Slepoy will receive around 10.5 million shares in M2 as part of the Dodo deal. The Eftel acquisition will see this rise to 17.4 million shares, or 9.8 percent of M2.

M2 CEO Geoff Horth said that the acquisition will help M2 expand its consumer and small business reach.

"The acquisitions are an excellent complement to our consumer division, and combined, our business possesses an excellent capability to grow our share of both the consumer and small-to-medium business markets," he said in a statement.

"Throughout the due diligence process, we were very pleased to find the businesses to be highly efficient, with robust internal systems and processes; a testament to the skill and dedication of the Dodo and Eftel teams."

In addition to having over 400,000 customers, Dodo has 45,000 active power and gas customers in Victoria, New South Wales, South Australia, and Queensland. Eftel has 130,000 active services.

The proposed acquisitions further reduce the size of Australia's telecommunications market. While a number of smaller telecommunications companies have started up off the back of the National Broadband Network, iiNet and M2 have largely been acquiring a number of the medium-sized telcos on the market over the last 18 months. The Australian Competition and Consumer Commission (ACCC) has also yet to approve Telstra's proposed buyout of Adelaide-based internet service provider Adam Internet.

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