TPG Telecom (TPM) continues to expand, yesterday announcing that it had bought AAPT, a subsidiary of Telecom NZ (TEL), for $A450 million.
TPG has bought AAPT to quicken the pace of the planned expansion of its fibre optic network across the country.
The market liked the news, sending TPG shares up by more than 13% to $4.68, a rise of 56c.
At one stage the shares were up 16% at $4.78 as investors ignored weakness elsewhere in the market and chased TPG shares higher.
In a statement to the NZX, Telecom NZ chief executive Simon Moutter said the sale of AAPT to TPG was part of his company’s decision to retreat from offshore involvements back to its NZ roots.
"The sale of AAPT is consistent with this strategy and with our desire to focus principally on our New Zealand operations and on the needs of New Zealand customers," he said.
It was a big move by Telecom NZ to sell AAPT which it bought 13 years ago for $2 billion. That plus the hundreds of millions of dollars of investment (and writedowns) means the Kiwi company has taken a whacking big loss.
TPG said it will fund the sale by increasing debt.
While AAPT has been a weak performer in recent years and in the year to the end of June, reporting a 15% fall in EBITDA to $57 million, it’s what comes with the company that is important to TPG.
AAPT’s best assets are its 11,000 kilometres of fibre-optic cable networks across six states and territories and connecting the major capital cities.
Those assets will help TPG’s plans to roll out fibre-optic cables to half a million apartments across the country.
”As well as bringing a large and profitable whole and corporate business, the acquisition of AAPT provides important new infrastructure to the TPG Group,” TPG executive chairman David Teoh said in a statement.
According to comments from the company at its annual meeting last week, TPG had just $42 million in net debt as of July 2013 (the end of its financial year). It had cash of $174.5 million in the bank and can easily accommodate the $450 million cost of AAPT.
The company was forecasting a small rise in underling ebitda to a range of $290 – $300 million from the $273 million earned in 2012-13. AAPT will boost that figure by more than $50 million.
