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Vocus, FX Networks: Consolidation goes regional

Juha Saarinen reports Vocus in talks to buy NZ backbone provider FX Networks. He writes:

Stock exchange-listed telco and internet provider Vocus is said to be eyeing up New Zealand national backbone operator FX Networks, in a deal worth over NZ$100 million (A$94 million), according to sources close to the discussions.

Other local sources close to the discussions confirm something is going on between the two firms.

Meanwhile the NBR’s Chris Keall provides more evidence:

Vocus in ASX trading halt after NBR report it will buy FX Networks: Vocus in ASX trading halt after NBR report it will buy FX Networks.

— Chris Keall (@ChrisKeall) June 30, 2014

Telecommunications consultant Jon Brewer tweets:

Vocus + FX could mean a single market for Internet bandwidth across Australia and New Zealand. That's pretty exciting.

— Jonathan Brewer 🇳🇿💉💉💉 (@kiwibrew) June 30, 2014

He is right about the deal being exciting. What we are seeing is a new twist to the consolidation that’s been reshaping New Zealand’s telecommunications sector since Telecom NZ first announced it would demerge its Chorus division to win government fibre contracts.

In fact there are two twists. First, we’re seeing consolidation at the transit level. FX Networks and Vocus run the long haul networks connecting cell towers, local fibre networks and exchanges to hubs. This will see economies of scale and greater buying power at this level.

The second twist is the regional nature of the deal. This comes not long after Telecom NZ finally pulled the plug on its Australian operations and following Telstra’s withdrawal from New Zealand. Potentially the Vocus FX Networks tie up will create a single market across Australia and New Zealand — with all that implies. It will also create a new large-scale player in New Zealand.