Competition set to rise in light of M2/Vocus merger

The proposed merger between M2 Group and Vocus Communications will create more competition in the market, according to its executives.

The two merged companies will be valued at more than $3 billion, creating the fourth biggest vertically aligned telco in the Australian market and third in New Zealand.

Vocus CEO and founder, James Spenceley, said the merger created more competition rather than less in the market.

M2 Group chairman, Craig Farrow, added that it was a vertical integration of two different telco businesses and he didn't anticipate too many problems with either the ACCC or New Zealand's Commerce Commission.

Farrow said there would be expanded geographic market reach in both Australia and New Zealand with multiple paths to market including retail, digital, direct and wholesale partners.

Vocus Communications will remain as the controlling company backed by brands across A/NZ including Dodo, iPrimus, Commander, CallPlus, Slingshot, Flip and Maxnet.

Analyst firm Ovum has said the merger will provide a stronger base of provisioning of services to the enterprise, small business and small independent ISPs.

Ovum telecoms research director, David Kennedy, said Vocus operates primarily in the enterprise and wholesale market, which is where the impact will be most felt.

He added that the merger was consistent with the long-term trend towards consolidation in the telecommunications industry.

“However, attractive acquisition targets that can add significant scale are becoming fewer as the trend unfolds,” Kennedy said.

“The ACCC has warned that it will carefully scrutinise future mergers between major players. We are in the consolidation endgame.”

M2 CEO, Geoff Horth will become the CEO of the merged group, while Spenceley will be an executive director on the combined board. M2 executive and founder, Vaughan Bowen, will also be an executive director focusing on strategic acquisition opportunities.

David Spence will be the chairman, and Farrow will be deputy chairman, while Tony Grist, will stay on as non-executive director.

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By Julia Talevski

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