Vocus NZ earnings soar with CallPlus acquisition, targets power bundle for growth

Vocus Communications' New Zealand earnings soared in the latter half of 2016 as the ASX-listed telecommunications company benefited from the addition of CallPlus when it merged with M2 Group, and it is targeting bundled power package as a means to drive growth on this side of the Tasman.

The Sydney-based company's New Zealand operations have rapidly expanded, with 654 employees compared to 117 staff a year earlier, through the deal which joined the CallPlus, 2talk, Orcon, Slingshot and Flip businesses with the local fibre line provider previously called FX Networks. Since then, Vocus added energy retailer Switch Utilities to its stable on December 1, paying $6 million upfront and a further $5.2 million in potential earn-outs.

Vocus' Kiwi operations generated $A158.3 million of revenue in the six months ended December 31 from just $A27.2 million a year earlier, before the M2 merger. Earnings before interest, tax, depreciation and amortisation jumped to $A26.5 million from $A6.6 million.

The company had 199,991 broadband customers as at December 31, compared to 186,713 a year earlier when CallPlus was under the M2 umbrella. Fibre customers jumped 84% to 37,500, more than offsetting a 7.2% decline in copper-line subscribers to 154,491, and helping lift the monthly average revenue per user (ARPU) to $71.88 from $67.68.

Vocus said it plans to cement its position in New Zealand, which will see it push into the energy market in an effort to increase ARPU and reduce customer losses.

The Switch Utilities acquisition brought with it 2299 power customers, still a minnow in New Zealand's electricity retail sector dominated by Genesis Energy, Contact Energy, Mercury NZ, Meridian Energy and Trustpower.

New Zealand's broadband market has become increasingly competitive as services providers cut prices to attract new customers, something Spark New Zealand has said is frustrating and driving customer churn.

Vocus sold its 50% share of Connect 8 fibre construction business to partner Spark in December, recognising a loss of A$2.6 million on the transaction.

The Australian company's group profit almost doubled to A$A47.2 million with a five-fold gain in revenue to $A888.2 million. Vocus' board declared an interim dividend of 6Ac per share to be paid on April 21.

The ASX-listed shares gained 5% to $A4.62.

(BusinessDesk)