5G Networks acquires Asia Pacific Telecommunications Group to fuel commercial property growth

5G Networks ASX 5GN APTel Asia Pacific Telecommunications Group

Moving on up in the networking space, 5G Networks (ASX: 5GN) has announced it will acquire APTel, an Asia/Pacific telecoms company for $6 million.

However, to complete the deal, 5G plans on going to the market to raise around $3.5 million via a placement of approximately 5.85 million new shares at $0.60 per share to shareholders.

Upon announcement of its acquisition, 5G shares rose to as high as $0.78 per share, around 6% higher before falling back to around $0.74 at the time of writing.

5G Networks offers high-speed networks and cloud infrastructure services demanded by modern businesses. The company is able to provide fibre access technology from third-party carriers as well as its own wireless network offerings.

By acquiring APTel, 5G Networks will potentially be able to expand both its technical capability and current customer base.

APTel is a Melbourne based voice, data and cloud communications service provider and aggregator with over 20 years history servicing over 800 mid-market corporate clients, hotel groups and commercial offices throughout Australia.

The acquisition comes after 5G’s Board identified APTel as a “very attractive business” that is likely to enhance the range of services that 5G Networks can deliver to its customers. 5G Networks also noted APTel’s strong customer base of 815 customers, who collectively generated revenues of $6.3 million in the last financial year.

“The acquisition of APTel is a significant illustration of the strategy that we outlined in our IPO prospectus. Immediately it increases our revenue and EBITDA levels to give us scale and cash flow and access to a substantial new customer base that we can use to leverage our core offerings. The integration of the APTel service suite with our own offering delivers a powerful business solution that can meet the modern demands of the mid-tier business market for broadband and cloud services,” said Joe Demase, Managing Director of 5G Networks.

Mr Demase added that 5G’s “immediate focus” will be on the successful integration of the APTel business and personnel and “delighting the APTel customer base” with the high-quality services the combined APTel 5G operation will deliver.

According to the terms of the deal, the acquisition price represents a 4x EBITDA multiple but is expected to produce synergy savings of $500,000 each year, which 5G says “will be recognised in the first six months from transaction completion” via migration of APTel customers to the 5G network and operating systems.

As a further supplement to the deal, the two companies have also entered a “partnering agreement” for 5G Networks to partner with the Deague Group, a luxury-focused private property developer first established in Melbourne in 1859. The group is best known for its Art Series hotels and the Whitehorse Towers apartment block in Box Hill which when completed, will be Melbourne’s tallest suburban residential tower.

The group recently saw its $150 million, 15,000 square metre office building project receive the go-ahead, to be constructed in the CBD later this year.

With access to Deague Group’s growing portfolio of large commercial properties, 5G Networks could potentially generate significant commercial opportunities because of the strong market demand for its 5G technology.

Modern high-speed internet facilities have been rolled out far slower than expected as part of the Australian government’s NBN programme while private building developments often require state-of-the-art facilities, especially in the luxury market occupied by Deague Group.

George is an award-winning market analyst who has authored articles and editorial opinion pieces for multiple publications around the world. He has written about a wide variety of topics including financial markets, stocks, trading, politics and economics.