‘We’ve grabbed all the lollies’: CEO
Vodafone NZ will be newly freed and focused if its $3.4 billion, 50:50 buyout by Infratil and Canadian investment company Brookfield goes ahead, say the two CEOs at the centre of the deal.
Infratil chief executive Marko Bogoievski, who is lined up to chair the post-deal telco, said Vodafone NZ management had been distracted over the past three years by the Sky TV merger bid and the mooted initial public offering (IPO).
He added that companies with offshore parents can “suffer from a lack of investment” and “could respond to a bit of love”.
Vodafone NZ chief executive Jason Paris, who like other managers will stay on post-deal, said his company had been a year behind rivals in launching an unlimited data mobile plan.
He saw scope for pushing some products harder, including Vodafone TV whose content is streamed over the internet, and,
in particular, fixed-wireless broadband.
Spark has made hay over the past couple of years in fixed-wireless, which uses a 4G mobile network to deliver broadband into a home, eliminating the need for a landline and, cutting wholesale Chorus out of the loop, making it a more lucrative business than fixed lines.
While Vodafone has been tentative, barely promoting the technology, Spark has signed up around 130,000 fixed-wireless customers. Paris saw a push to move 15 per cent of Vodafone NZ’s customer base to fixed-wireless over the next couple of years.
As much as he highlighted Vodafone NZ’s new freedom, Paris also emphasised continuity. Infratil and Brookfield will be able to continue using the Vodafone brand, and get preferential roaming rates and access to Vodafone Group’s technology in areas like streaming and the Internet of Things under a licensing deal.
Paris said: “We’ve gone into a lolly shop and grabbed all the lollies we loved and left the ones we don’t.”
Investors didn’t seem to be immediately sharing the delight. Infratil shares were down 5.65 per cent to $4.34 soon after the news was announced, closing yesterday at $4.48.
Were investors worried that a Vodafone NZ unchained would also be a Vodafone NZ that was a little too free with its cheque book?
Bogoievski said there was no capex fright. The dip was the expected reaction to Infratil’s plan for a $400 million equity raise, which it will use to help fund its share of the deal.
The Infratil boss’ take was “reasonable”, First NZ Capital institutional research head Arie Dekker said.
But he added: “There is an element of catch-up capex in the forecasts that reflects Vodafone NZ’s ability to take its own view, outside Group strategy, on things like fixed wireless. It will also reflect investment to transition away from Vodafone Group and simplify the business, enabling operating cost savings in much the same way as Spark reengineered its business.”
Vodafone NZ CEO Jason Paris says the deal will deliver clarity and certainty after years of distraction with attempted Sky TV merger and IPO. He sees accelerated product launches ahead.
The $3.4b deal will see Infratil and Brookfield chip in $1b equity, Vodafone Group the same amount, and Vodafone NZ take on $1.4b debt.
“While that level of debt looks high compared to Spark, Spark takes a conservative approach on its balance sheet through its focus on retaining an A credit rating,” Dekker said. “With relatively stable earnings that level of debt is probably okay although there are high investment requirements to take into consideration also with capex accounting for over half of ebitda.”
In an NZX filing on the deal based on yet-to-be-audited figures, Infratil said Vodafone’s New Zealand business had revenue of $1.99b in the year to March 31, adjusted ebitda of $463m, capital expenditure of $253m and an adjusted operating free cash flow of $210m.
Bogoievski says “probably everything” has changed about telecommunications since his days as CFO of Telecom. He’ll leave dayto-day running to Paris.
Bogoievski says the timing of the deal is down to the Commerce Commission and Overseas Investment Office, which will assess it over the next few months.