- 5G Networks observes a strong earnings potential in its new part-owned subsidiary Webcentral.
- The outstanding loans owed to 5G Networks from Webcentral can be used to provide the former with some cash for further acquisitions.
- In parallel to this, the companies are also preparing for the expected opening up of the .au domain.
According to 5G Networks managing director and current Webcentral CEO Joe Demase, 5G Networks observes a strong earnings potential in its new part-owned subsidiary Webcentral.
“We had to pay out some bank debt of about $47m as a part of the purchase, but if you strip out that bank debt we picked up half of the business for just around $9m,” the CEO said. “It seems strangely cheap for a business that's now run rating at $7-10m, with revenues of [around] $55m. We knew we weren't going to get a 100% [stake], but once we got control, we could really take advantage of Webcentral's cloud solutions by moving those off the public cloud onto our cloud infrastructure.”
Earlier this year, 5G Networks acquired a controlling stake in Webcentral in an offer that is worth 17.7 cents per share. This fended off a competing offer from US-based Web.com, which had bid 15.5 cents per share – or $18.9m – for 100% of the company.
The outstanding loans owed to 5G Networks from Webcentral, which amounts to around $42m, can be used to provide the former with some cash for further acquisitions. For this reason, the companies are now exploring their options. Apart from this, the focus of 5G Networks Webcentral in the next half a year is set to be continuing the exploration of synergies and efficiencies in the business.
Rights for the .au Domain
In parallel to this, the companies are also preparing for the expected opening up of the .au domain. The latter could be a significant source of revenue for the registrar according to the CEO. He further noted that in Britain, the opening up of the .uk domain resulted in a 30% take-up rate for operators of existing .co.uk domains.
“There are some regulations that are still being worked through, but I think that if you've got the .com.au domain there's a good chance you'll get first rights for the .au. And that's about businesses protecting their brand,” Demase said. “From a registrar perspective, if we're hosting the .com.au, then we get to sell the .au. So we think there's going to be a significant uplift in revenue that will [flow through] to profitability.”
To enhance the overall customer experience, even in light of the impact of COVID-19 on the company's offshore call centre operations, 5G Networks has also been working hard. “[Prior to the pandemic] the majority of support was being done overseas in the Philippines. They've really copped it with COVID and are still copping it with COVID now,” the CEO said.