Australian telecommunications carrier 5G Networks (ASX: 5GN) will add $3 million of annualised revenue to its books through the $5.7 million acquisition of Melbourne Data Centre (MDC) announced this morning.
The investment will enable a strategic expansion of 5GN’s infrastructure footprint and strengthen its current product portfolio by enabling seamless access to the 5GN cloud through its managed data network launched last month.
It will also unlock opportunities for cost savings and operational synergies for 5GN, which currently spends $3.8 million per year in data centre services from third party providers.
The company hopes to realise savings of $600,000 within three months from the acquisition date.
Terms of purchase
Under the terms of purchase, 5GN will pay MDC $1 million cash on completion and issue 5GN shares to the value of $1.75 million (based on a five-day volume weighted average price).
The remaining amount will be split and paid to MDC over a three-year period, commencing with $500,000 in quarterly payments over the first year.
A second year payment will total $1.25 million and in the final year, MDC will receive $1.15 million.
As part of the deal, 5GN will provide data centre services over the next three years to the sellers – a service valued at $1.6 million.
5GN managing director Joe Demase said the acquisition will complete “another piece of the infrastructure puzzle”.
“We can now offer direct and managed access from our own data centre all the way through to cloud and managed network services,” he said.
“Through this growing infrastructure footprint, we can manage the digital experience so that our services are easy to use and seamless for customers, all locally managed with a single point of contact through our national service centres.”
He said 5GN will begin explore wholesaling options for the growing number of infrastructure products being offered by the company.
Established seven years ago, MDC’s 4.5 megawatt data facility has 330 racks with Tier 4 design, ISO accreditation and round-the-clock security surveillance.
It is supported by full redundancy with the potential to operate at 100% capacity.
Mr Demase said his company currently connects a significant portion of its fibre and wireless network in MDC.
5G is the next generation of connectivity, believed to be capable of sending data almost 1,000 times faster than current 4G services.
Industry research shows 5G subscriptions will reach 1.5 billion people worldwide by 2024.
At midday, shares in 5GN Networks were up 7.78% to $0.90.