M2 Communications, an Australian wholesale provider of telecom services, has bought 100% of Primus Telecom. The move confirms speculation that consolidation of minority stakeholders in the Australian telecommunications industry will continue, ahead of a new regime under the government controlled National Broadband Network (NBN).
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Primus had its origins as Axicorp, one of the earliest competitive providers following the privatization of Telstra in the mid 90’s. Axicorp was acquired by American telecoms group Primus Telecom, and quickly started using its own brand to provide wholesale and retail products in the competitive era. Primus Australia acquired a number of smaller companies such as Eclipse and Hotkey.
Primus Australia’s links to its American parent helped to secure several interests in undersea fibre-optic connections, allowing Primus to offer a full range of products under a re-jigged iPrimus brand, including ADSL, ADSL2+ and fixed line services. Primus Telecom has maintained nearly 300 urban exchanges and a ring of interstate fibre, allowing for cheap, fast and stable retail products.
M2, a wholly-owned Australian telecommunications provider, has been operating mostly as a wholesaler, though it dipped its toes into the retail waters when it acquired Southern Cross in 2007. Southern Cross operates on a similar family-friendly message as Club Telco (Click here for Club Telco plans), by offering 1-month contracts and no connection fees. With Primus, M2 is making a major play in the retail internet game by acquiring 165,000 customers, doubling its Australian staff from 500 to 1000, and adding a burgeoning network of data centres that will aim to provide cloud-based services, mostly to small and medium sized businesses. M2 has been building a trail of acquisitions, perhaps as a response to similar moves from iiNet.
In the press release, Primus’ marketing and products GM Andrew Sims stated “I strongly believe that the coming together of both companies is a terrific business combination, not only for our customers but for the broader competitive environment in Australia”. Concerns regarding the tightening of Australia’s telco market (focused on broadband) were raised around Christmas last year, when iiNet acquired longtime rival Internode. That Sims’ comments would directly address the issue suggests sensitivity to concerns from industry watchers and competition watchdogs like the ACCC.
The purchase follows news from other industries of strong Australian companies buying interests in American firms, especially in mining. American tradesmen are also being enticed to come offer their skills by emigrating to Australia. With the Australian dollar holding parity with the USD for over a year, one can imagine other Australian interests that have been acquired by US parents might start coming back to Australia - companies like Vegemite and Arnotts.
Speculation aside, the purchase, due to be completed by June 2012, will not affect existing iPrimus customers. iPrimus CEO Tom Mazerski has stated that existing iPrimus residential consumers will continue as they have been, under the iPrimus banner, and that "...we have some great news as we are getting ready to launch our new “No Worries™” Broadband and Bundle plan upgrades in the coming weeks".
Both M2 and iPrimus have demonstrated early and strong interest in the NBN, with M2 actually being the first company to organize a full NBN connection at the Armidale test site in July 2011. With the recent release of NBNco’s 3-year rollout schedule, expect M2/iPrimus to launch a major campaign to be amongst the early adopters.