Exetel Acquisition: Key Details, Impact, and What Comes Next

Superloop's acquisition of Exetel marks a significant development in the telecommunications industry. By integrating Exetel's extensive customer base and service capabilities, Superloop aims to enhance its market position and service offerings. This strategic move, valued at nearly $81 million, underscores the growing trend of consolidation within the sector, promising improved connectivity and expanded reach for both companies' customers.

What Is Exetel?

Founded in 2004, Exetel is an Australian telecommunications company offering a wide range of services, including nbn™ plans, fibre, home wireless, and mobile broadband (4G). Additionally, they provide home phone and mobile phone services. Exetel differentiates itself in the market through its comprehensive suite of broadband and phone services, catering to diverse customer needs with various connectivity options. This extensive service portfolio positions Exetel as a versatile player in the telecommunications industry.

Who Acquired Exetel?

Superloop is a telecommunications service provider known for delivering high-quality, reliable internet services, SIM-only mobile plans, and home phone services. The company plays a crucial role in the industry by focusing on performance and customer satisfaction. Superloop's commitment to fast and dependable connectivity positions it as a competitive player in the market, catering to a diverse range of customer needs with its robust service offerings.

When Was Exetel Acquired?

Superloop completed the acquisition of Exetel on August 2, 2021. This acquisition occurred during a period of significant consolidation within the telecommunications industry, reflecting a broader trend of companies seeking to expand their market presence and service capabilities. The timing aligns with Superloop's strategic initiatives to enhance its infrastructure utilization and achieve cost synergies, positioning the company for accelerated growth and improved financial performance.

Why Was Exetel Acquired?

• Market Expansion: The acquisition of Exetel by Superloop significantly enhances Superloop's market presence. By adding over 110,000 residential and business customers from Exetel, Superloop aims to increase its market share and broaden its customer base, thereby solidifying its position in the Australian telecommunications sector.
• Technology Integration: Superloop stands to benefit from integrating Exetel's advanced technology and infrastructure. This includes leveraging Exetel's existing networks to improve service delivery and connectivity. The combined technological assets are expected to bring "super fast, super easy & super reliable connectivity" to a larger number of homes and businesses.
• Competitive Advantage: The acquisition strengthens Superloop's competitive position by expanding its service capabilities and market reach. The deal is expected to be materially accretive to key financial metrics such as EPS, EBITDA, and FCF, and the estimated cost synergies of approximately A$5 million per annum will further enhance Superloop's operational efficiencies and market competitiveness.

Acquisition Terms

• Acquisition Price: A$110 million (comprising A$100 million in cash and A$10 million in Superloop shares).
• Payment Method: The acquisition was funded through a combination of cash, stock, and refinanced debt facilities. Specifically:
  • A fully underwritten pro-rata accelerated non-renounceable entitlement offer to raise ~A$51 million.
  • A fully underwritten placement to new institutional investors and existing shareholders to raise ~A$49 million.
  • Scrip consideration (an issue of new Superloop shares) to Exetel's shareholders of A$10 million at A$1.01 per Superloop share.
  • Refinanced debt facilities with an incremental A$20 million for acquisition funding.
• Key Conditions or Agreements:
  • The acquisition is subject to certain conditions precedent, as described in Superloop's Investor Presentation.
  • The transaction is expected to complete in late July 2021.
  • The acquisition is materially accretive to key financial metrics including EPS, EBITDA, and FCF on an FY21 pro-forma basis.
  • Estimated cost synergies of ~A$5 million per annum are expected to be realized within the first 12 months.
  • Superloop has secured credit approval for A$92.2 million of debt, including an uplift of A$20 million for acquisition funding and an uplift of revolving working capital and multi-option working capital facility of A$10.5 million.

Impact on Exetel

The acquisition of Exetel by Superloop has led to notable changes in operations and management. Superloop has integrated Exetel's operations, bringing in new leadership roles and merging teams to streamline business strategies. This integration aims to leverage Exetel's existing networks and customer base, enhancing service delivery and operational efficiency. The combined entity is expected to benefit from cost synergies and improved infrastructure utilization, positioning Superloop for accelerated growth and enhanced market competitiveness.

In terms of product offerings, the acquisition has expanded Superloop's service portfolio, incorporating Exetel's diverse range of nbn™, fibre, and mobile broadband plans. This merger promises to deliver faster, more reliable connectivity to a broader customer base. Employee reactions have been mixed, with some expressing optimism about new opportunities, while others are concerned about potential job security issues. Customers, on the other hand, are generally positive, anticipating improved service quality and expanded offerings. For founders considering business transitions, tools like Sunset can assist in managing such processes compliantly and efficiently.