Vocus, M2 execs: $3bn merger will increase competition

Executives involved in the proposed blockbuster $3 billion Vocus-M2 Group marriage have claimed the deal would actually increase competition in the telco sector.

The ACCC had already stated from its enquiry into the TPG-iiNet merger that it would keep a close eye on further rationalisation in the industry. Vocus chair David Spence pre-empted the scrutiny, saying that the M2 deal is "a vertical integration of two different telco businesses".

"We don't believe there will be too many problems with any of the competition councils, either in Australia or New Zealand," he said at a press conference today.

M2 founder and executive director Vaughan Bowen said that the companies have "very mature wholesale operations" and that this would enhance competition in the telco sector.

"We are a very important enabler of competition through our respective wholesale businesses," Bowen said. "We have great wholesale pedigrees and we see that as a really important part of our strategy… I think it's a net positive for competition generally."

The merged company will be named Vocus Communications Limited, with market capitalisation of more than $3 billion. The two giants are no foreigners to industry rationalisation, with Vocus chief James Spenceley saying that "there has been 30 acquisitions between us".

What will happen to all the brands?

M2 and Vocus also announced that $40 million of "cost synergies" are expected, although details of how the savings would be made were not revealed.

When asked about brand rationalisation, Bowen admitted that Vocus is a valuable name in the corporate world and that some business customers of the M2 Group would be moved across.

"The Commander corporate customers would, logically, become Vocus corporate customers," he said, while still emphasising that all brands would be retained for now.

The M2 Group owns several recognisable Australian brands such as Dodo, iPrimus, Commander and Engin.

"We've got a compelling brand portfolio and we see that they all have relevant roles to play. But obviously [brand rationalisations] will be decisions for the merged board to consider," said Bowen.

Vocus Communications has only recently completed its hard-fought acquisition of ICT service provider Amcom. The integration of Amcom would complete by April, according to Spenceley, and there is "no rush" for the merger integration with M2.

The telco and ISP industry has already seen much upheaval this year, with giants TPG and iiNet coming together in a $1.56 billion deal to become the second largest player. M2 had attempted to scuttle that acquisition at one stage with its own bid.

Vocus itself fought a bitter battle with TPG to acquire service provider Amcom in a saga that forced Spenceley to call TPG's behaviour "disgusting".