Imagine deal fuels earnings growth at Magnet Networks

EARNINGS grew eight times higher at telecoms business Magnet Networks last year after it paid €14.2m to buy Imagine Telecommunications’ business-to-business arm.

Magnet said its EBITDA (earnings before interest, taxation, depreciation and amortisation) was almost €4m, up from just over €500,000 last year.

The company is owned by Columbia Ventures Corporation (CVC), an American private-equity firm run by Ken Peterson.

Magnet said the Imagine deal was financed by a €14.5m credit facility from lender Blue Bay. Losses in 2016 shrunk to €3.73m. The company said this included amortisation costs of €4.8m associated with the Imagine deal.

“In what was one of the largest consolidations within the Irish telecoms sector in recent years, the acquisition added approximately 6,000 business customers to the Magnet Networks base,” said Magnet’s chief financial officer, Conor O’Reilly.

“We didn’t have to spend a lot of money on our network, which was already built for scale. Essentially, we acquired the customers without the attendant infrastructure requirement, with the added bonus that we already had the back-office functions in place to service the customers.

“Magnet Networks is growing as a business, and we have increased our staff from 69 to 92 employees in the past year, though not all were directly related to the Imagine deal. Further expansion is planned for 2017 and beyond,” O’Reilly said.

“The business-to-business market remains the key strategic growth area for Magnet Networks, offering strong margins and low churn,” O’Reilly said.

Magnet Networks now has 10,000 business customers and a residential arm consisting of 6,500 subscribers. Clients include Amazon, Google and Adobe.

It said the Imagine deal — signed in March 2016 — saw the company’s turnover increase by approximately €10m over 10 months, with related cost of sales rising by €5m.

With the support of its parent, CVC, Magnet has invested over €120m in developing an advanced telecoms network since it was established in 2004.

Parent company CVC is not to be confused with the Luxembourg-based private-equity firm with the same initials which used to own the Formula One motorsport group.

Magnet is working with Lone Star property development firm Quintain on a smart city project at Wembley in London. It teamed up with Cisco to provide a network for broadcasters, fans, and retailers operating contactless payment networks at last year’s FA Cup final

The network was designed to enable nearby retailers to market directly to Chelsea and Arsenal fans to try and attract them into their stores.

It was also set up to monitor devices not connected to the network to help with security, crowd control, and accident prevention.