Bigger fish eating smaller fish supports growth strategy
Our investment Vonex (ASX: VN8) has been aggressively growing its integrated telecommunications business through acquisitions, digesting four telcos over the past two years. This has led to the company posting record sales, PBX customers, and annual recurring revenue in its latest half yearly report.
This strategy is outlined in our second objective set for VN8 in our 2022 Investment Memo: “Grow users through integrated acquisitions and cross-selling opportunities”.
It is a similar blueprint to what fellow telco Uniti Wireless (ASX:UWL) has followed since its inception as a 25 cents per share IPO in 2019. Over the past two years, UWL acquired several smaller companies, including its $610 million takeover of OptiComm in late 2020. The strategy culminated last month with UWL receiving a takeover bid of $4.50 per share from NZ’s Morrison & Co, valuing the company at over $3 billion. Since then, Macquarie has also lobbed a takeover bid for UWL, demonstrating “the intense demand for telecommunications assets in a post-virus world”, as reported in today’s AFR.
As we wrote late last year, it’s a common thematic in the telecommunications industry for telcos to ultimately be acquired. Over 83% of ASX listed telcos with a market cap of between $15M to $500M have been acquired since 2010.
We like the growth trajectory of our VN8 investment, but want to see this translate into becoming both cashflow and EBITDA positive this financial year, as per our Investment Memo objectives:
