New Zealand telecommunications provider Spark said it’s planning to fully acquire small carrier TeamTalk in an effort to expand its provision of internet services across the nation, ZDNet reported. The small provider offers mobile radio services and metro fiber services under its brand CityLink and also rural internet services under its brand Farmside.
TeamTalk is reportedly one of the largest resellers of the New Zealand government’s Rural Broadband Initiative (RBI) through the brand Farmside, which uses satellite, ADSL, and wireless technology to provide internet connectivity in regional areas.
If Spark’s acquisition of TeamTalk proceeds, the company’s CityLink brand would also provide Spark with a free Wi-Fi service throughout the capital city of Wellington, as well as fiber, dark fiber, and custom networks within six cities across the nation.
ZDNet reported that the acquisition would occur via an offer price of 80 cents per share – 78 percent higher than their worth at closing on February 3. Spark’s managing director Simon Mouter said the acquisition of TeamTalk will enable growth in revenue for the leading operator, despite having seen a fall in earnings and profit over the last few years.
“TeamTalk is a small operator in the New Zealand telco market. Its financial performance has declined over the last few years, with a number of profit downgrades, and it faces significant re-investment requirement across its businesses,” said Moutter.
“Given TeamTalk’s debt position (last reported bank debt was NZ$33.6 million with a maturity date of September 2017), and a small market capitalization (approximately NZ$12.8 million), its ability to fund this investment is constrained. This has been reflected in TeamTalk’s decision not to pay a final dividend to shareholders in FY16.
“Spark, as a digital services company with its own extensive networks, distribution channels, and customer base, has the ability to provide a more positive pathway forward for TeamTalk customers and staff.”
According to ZDNet, Spark has requested that it completes due diligence on TeamTalk before proceeding with the acquisition.
In December 2016, Spark acquired the remaining 50 percent of fiber construction company Connect 8, which is originally formed with Vocus Communications in February 2015, contributing to its goal of establishing a full-fiber network throughout the cities of Wellington and Auckland.
“Spark already connects cities, exchanges, and datacenters around New Zealand to fiber,” said Spark chief operating officer Mark Beder last year. “Given our extensive existing fiber footprint and our goals to be the market leader in data and digital services, full ownership of Connect 8 makes strategic sense. It gives us even more flexibility, capacity, and control over our fiber construction and delivery.”
The company reported a NZ$370 million net profit for the 2015-16 financial year, attributed to increasing mobile and cloud users. Earnings before interest, tax, depreciation, and amortization (EBITDA) came to NZ$986 million, up 2.5 percent from the NZ$962 million reported for the previous financial year.