AGL drops bid for Vocus as turnaround struggles continue

Australian energy company AGL withdrew its A$3 billion takeover offer for Vocus. That makes it the second potential buy to walk away from the business in the past fortnight and the fourth in two years. In each case the deal floundered at the due diligence stage.

The move saw Vocus shares lose a third of their value. Meanwhile AGL shares climbed on the news.

AGL says; "We are no longer confident that an acquisition of Vocus at the proposed terms would represent sufficient certainty of creating value for AGL shareholders."

Turnaround

Vocus chief executive Kevin Russell repeated his earlier comments following the failed A$3.3 billion offer from Swedish private equity firm EQT. He says the company is in the midst of a three-year turnaround and it will now focus on growing market share of its network business.

He says; "We have great confidence that our strategy and ability to execute our business plan will deliver significant value to our shareholders in the medium to long-term".

In 2017 private equity firms Kohlberg Kravis Roberts and Affinity Equity Partners both withdrew bids.

Reports in Australian media say that bidders walk away from Vocus because the plan to turn around the business is more complex than it appears from outside the company. Vocus is the result of a number of industry mergers, along the way it acquired other companies and has struggled to integrate the parts.

In Australia, Vocus' consumer business is losing money.

Free RWC offer troubles Spark rivals

Spark is to offer customers free Rugby World Cup streaming as a contract signing lure. To get the service a customer must sign a 24 month mobile or a 12 month broadband contract. Spark had previously said it didn't plan to give away the RWC service.

The move causes a wave of protest from other retail service providers who had previously intended to resell RWC packages. BusinessDesk reports 2Degrees chief executive Stewart Sherriff calling it "a defining moment for monopoly content".

He says Spark is using the streaming service in exactly the way the company warned Vodafone could have used Sky TV material had the two companies merged.

Last straw

Meanwhile the New Zealand Herald published Vodafone, Vocus pull out of resale talks as Spark makes Rugby World Cup free for its customers. Chris Keall writes: "The move has proved the last straw for Vodafone and Vocus (owner of Orcon and Slingshot) who had been in talks to resell RWC Tournament Passes.

"Along with 2degrees, they had accelerated investment in their networks, upgrading them to better stream Spark Sport - and they say the expected quid pro quo was that they would get the right to re-sell Tournament Passes with a fair wholesale price."

Keall quotes Vocus Consumer GM Taryn Hamilton who told the Herald: "We've given up talking to Spark. Their offer was less-than-average and unsurprisingly we haven't bothered to take it up".

In a related move Sky Television said its Rugby Channel is no more. The service was sold as an add-on, but has now been wrapped back into the mainstream Sky Sport service.

Hawaiki opens alternative US route

Hawaiki Submarine Cable has added an alternative connection from New Zealand and Australia to the US west coast. It means Los Angeles is now a Hawaiki point of presence. Hawaiki says it is an ultra-low latency path from Sydney to Los Angeles 'specifically designed to optimally support latency-sensitive applications such as online gaming and high frequency trading'.

Spark says streaming tech ready for RWC kick-off

Despite media reports of teething troubles with Spark Sport, the company says it is on track to deliver all 48 Rugby World Cup matches live and on demand. Head of Spark Sport Jeff Latch says: “Customers can see this in the improved user experience, and the bugs that are a normal part of deploying a new piece of software are rapidly disappearing.”

Spark Sport says the technology will exit beta mode in mid-July, a move that indicates it is match fit. To date more that 300 sporting events have been delivered. The company says all but five have run smoothly. What's more, the issues were to do with production and process, not the technology.