In a move that sees Vocus grow its fixed line subs by 10% to 220,000, it is buying Stuff Fibre.
Vocus is a company that grew rapidly between 2010 and 2016 through M&A activity, picking up Maxnet, FX, Nextgen, Amcom and M2 among others. This led to a confused mess of companies, each effectively acting as separate entities with staff having limited visibility between silos.
When Vocus NZ was up for sale last year I wrote:
In purchasing the NZ assets of the Vocus Group, the “lucky” buyer will not be purchasing a single entity, but rather a disconnected group of disparate companies that have largely been left to their own devices since being acquired by either M2 or Vocus.
There are a number of billing systems, coverage check tools and customer relationship management systems in use… there will be significant work to be undertaken to gain efficiencies that will enable the true value of the purchase to be obtained.
The weight of the task was underscored by the appointment, and almost immediate departure, of the transformation chief bought in by Vocus. Justin Haddrick had very relevant experience in other businesses of a similar size, but was unable or unwilling to take on the challenge Vocus presented.
The successful bidder will find the integration of legacy systems, managing people in/out of roles, and network changes both disruptive and expensive. Skilled people will need to be brought on to oversee the operation, new systems and hardware will need to be purchased, and key changes carefully managed to ensure continuity of services.
The same anticipated difficulties in Australia saw a $100 million profit downgrade for the Vocus Group, so each of the bidders needs to be factoring in a solid buffer for the cost of the process in NZ once they take ownership.
While some work has been completed by Vocus since then to rationalise its core network and ancillary systems, the work left to do is huge.
So, is the purchase of Stuff going to make this situation worse?
The purchase of Stuff Fibre is reasonably unique as it does not operate a network as you would expect from a traditional ISP operating at that scale.
Devoli (formerly Vibe) provides the automation and network behind the scenes, leaving Stuff Fibre to act as a sales and marketing engine, which it was well placed to do with the advertising platform offered by its parent company.
Somewhat ironically, Devoli won the contract to provide wholesale services to Stuff Fibre from Vocus a few years back.
This will be a solid punch to the guts for the team at Devoli, but the model they have been running will now make the acquisition and migration of customers easier for Vocus to manage; perhaps exhibiting learning from their previous deals.
Was Stuff Fibre a good buy?
Without knowing the purchase price, it’s hard to say for sure, but on the surface, it seems like it to me. I think that if Vocus was inheriting yet another network and billing platform to integrate, it could have been a case of FOMO driving a potentially counterproductive purchase. Still, Mark Callander is smarter than that and looks to have made a good call here.
Time will tell once the purchase price is announced.
Post Written by Brendan Ritchie