MTU 0.00% $12.17 m2 group ltd

acquires protel communications

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    M2 Telecommunications Group Limited
    ACN 091 575 021 (ASX : MTU)
    ______________________________________________________________________________
    Company Announcement – 2nd February 2005
    ______________________________________________________________________________
    M2 ACQUIRES PROTEL COMMUNICATIONS
    On Wednesday 2nd February 2005, M2 Telecommunications Pty Ltd, a wholly owned subsidiary of
    M2 Telecommunications Group Limited (collectively referred to as “M2”) entered into a sale
    agreement whereby it acquired 100% of the share capital of Protel Communications International
    Pty Ltd and Protel IP Pty Ltd (collectively referred to as “Protel”).
    The consideration paid by M2 for Protel is comprised of a minimum payment equal to $1.5M plus
    an additional consideration of up to $1.5M, payable on 15 July 2006, subject to specific
    performance milestones related to the gross operating profitability of Protel for the period between
    February 1 2005 to June 30 2006.
    Protel is a Sydney based telecommunications service provider incorporated in 2001, specialising in
    the provision of voice, data and mobile services for (larger) small businesses and medium sized
    corporate customers.
    Protel has been acquired by M2 as a going concern, with the majority of Protel’s key personnel,
    including the principal vendors being either employed or engaged by M2. Protel’s core operations
    are to continue to operate from its existing inner western Sydney office premises.
    In light of the ongoing involvement of the Protel vendors in the operations of the business, the
    abovementioned consideration and additional consideration are comprised of a combination of
    cash and M2 Telecommunications Group Limited ordinary fully paid shares (MTU Shares). The
    MTU Shares issued to the Protel vendors are subject to certain trading restrictions, in accordance
    with ASX Listing Rules.
    In line with M2’s stated strategic plan (as per Prospectus, dated September 7 2004) to acquire
    complementary businesses within the telecommunications service provider market and to increase
    M2’s presence in New South Wales, the Directors believe that the Protel acquisition is a
    strategically effective move for M2 and are pleased to have agreed appropriate commercial terms
    with the Protel vendors.
    The key strategic benefits to M2 arising from the Protel acquisition, may be summarized as follows:
    • Provides an established base of small & medium enterprise customers, adding to M2’s
    operating profitability and further enhanced through economies of scale and wholesale
    purchasing improvements.
    • Adds key management personnel to M2, bringing with them proven capabilities in mobile,
    data and emerging telecommunications technologies, including wireless broadband and
    Internet Protocol technology.
    • Increases M2’s competitiveness in the medium enterprise and small corporate market,
    through broader product offerings and enhanced corporate sales capabilities.
    • Provides M2 with a increased management and customer presence in the NSW market
    On the basis of preliminary forecasts for Protel in 2005/6, the total consideration to be paid for
    Protel will represent a purchase price multiple of approximately 3.7 times forecast NPAT. The cash
    component of the consideration and additional consideration is to be paid out of M2’s existing cash
    reserves and payment is staged over a seventeen month period, thus not adversely impacting M2’s
    day-to-day working capital.
    The Earnings Per Share (EPS) contribution of Protel to M2 for the 2005/6 financial year, based on
    the abovementioned preliminary forecasts and taking into account the MTU Shares issued as part
    of the Protel payment consideration, is forecast to be approximately 1c per MTU Share,
    representing a 28.5% increase in EPS as compared with M2’s 2004/5 EPS forecast of 3.5c per
    share.
    With regard to the remaining four months of the current 2004/5 financial year, the Directors have
    taken a conservative view in opting for M2’s forecasted earnings for this period to remain
    unchanged, having taking into account the anticipated one-off integration costs of certain of the
    operational aspects of the Protel business and the staged timing associated with realising
    wholesale purchasing benefits and other scale economies for Protel.
    For investors seeking additional information on the product and service offerings of Protel, this may
    be obtained by visiting www.protelcommunications.com.au
    For further information, please contact :
    Darryl Inns
    Company Secretary
    P : 03 9524 7555
    F : 03 9524 7524
    E : [email protected]
 
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