Australia’s fourth-largest mobile service provider Amaysim (ASX: AYS) has continued its turnaround since closing its mobile device store last year and selling its broadband business, by acquiring mobile virtual network operator Jeenee Communications for around $7.8 million.
The company declared that the deal affirms its position as Australia’s leading mobile virtual network operator and will serve as a strategic pillar to grow its position in the mobile market both organically and through complementary bolt-on acquisitions.
In order to finance the acquisition, Amaysim said it will facilitate its circa $30 million cash balance and will utilise existing capital lines from its syndicate banks to increase its debt facilities by as much as $14 million to support this and future acquisitions.
The acquisition will not impact earnings in the current financial year but is expected to deliver a “solid earnings contribution” in the next financial year.
Next generation of telephony
Amaysim offers a range of mobile telephony and energy supply services that strip out customer bureaucracy and focus on delivering simplified contracts at competitive prices.
One of the company’s flagship deals is an unlimited mobile data plan for $40 per month with no fixed contract or lock-in period.
The deal to acquire Jeenee is an attempt to haul in more customers and expand its market footprint.
Jeenee currently has more than 41,700 recurring mobile subscribers and utilises the Optus network in the same vein that Amaysim does.
The acquisition allows Amaysim to absorb Jeenee’s operations and raise its total recurring mobile subscriber base to almost 700,000 customers.
If including pay-as-you-go customers, Amaysim will expand its clientele to 1.03 million, although, at the current time, such customers only generate a total of 5% of the company’s revenue.
In a statement, Amaysim said that with the deal now agreed, it plans to conduct a “robust migration plan” that will ensure Jeenee customers undergo a smooth transition with minimal impact upon services. The Jeenee brand and systems will also be retired over the next 6 months.
According to the terms of the deal, Amaysim’s revitalised network supply agreement (NSA) with Optus will apply to all of its newly-acquired subscribers, delivering strong cost synergies, positive operating leverage and compounded earnings over time.
“The acquisition of Jeenee is a financially and strategically attractive opportunity that allows Amaysim to leverage its revitalised Optus NSA and operating structure to increase shareholder value,” said Amaysim’s chief executive officer and managing director, Peter O’Connell.
Changing of the guard
In October this year, Mr O’Connell addressed shareholders at Amaysim’s annual general meeting where he explained the company’s recent turnaround and restructuring activities over the past year, which he dubbed as a “re-set” for the business.
In August 2018, Amaysim closed its mobile device store and a few months later, sold its broadband business in order to become leaner in a fiercely competitive market.
Moreover, the company halted investment in marketing activities and directed significant resources towards preparing for regulatory change within the energy market which took effect in July this year.
Amaysim also completed a $50.6 million capital raise in parallel to debt refinancing in March and restructured its network supply agreement with Optus.
Last but not least, Mr O’Connell was himself part of a reshuffle at board and management level that included the departure of former CEO Julian Ogrin and the welcoming of two new non-executive directors, a new chief executive officer and a new chief financial officer.
“Amaysim is exploring a number of other bolt-on acquisitions in the mobile market that can be readily integrated into the Amaysim Group to deliver strategic value and cost synergies by leveraging existing systems, processes and the revitalised NSA,” the company said.
This morning’s news boosted Amaysim shares by more than 11% up to $0.435 per share, valuing the company at around $128 million by market capitalisation.