JSE-listed Vox Telecom has extended its buying spree through the potential acquisition of banking group Absa's Internet service provider (ISP).
A Vox statement says the purchase of Absa's 68 000 individual Internet accounts will be incorporated into its @lantic consumer division. The deal is subject to a Competition Commission ruling. The value of the deal has not been disclosed.
Vox CEO Douglas Reed says the merger of the country's third and fourth largest consumer ISPs will create a strong competitor to Telkom Internet and MWeb.
"Absa's cost-effective service has played a pivotal role in getting thousands of people onto the Internet for the first time, and many of them are now ready to move on to a more specialised service.
"Vox Telecom is able to offer a much greater menu of choices, including a pay-as-you-go dial-up connection, a Vox ADSL phone, three specialised ADSL offerings, and the full range of iBurst and wireless Internet offerings," Reed says.
Appetite for growth
Market observers say the deal shows Vox has not yet satiated its hunger for growing through acquisition.
"By my count, Vox has bought about 10 companies over the past four years," says one market observer, who did not want to be named because he works for one of Vox's competitors. "The big question is: how are they going to integrate all those companies?"
The observer says usually Vox makes a purchase just before the release of its annual results.
"I was wondering what happened this year, but I am glad to see they have done the deal just in time," he says.
Today, Vox announced its results for the year ended 31 August will be released on 14 November and that earnings will be between 90% to 110% higher that last year's.
Sense and sensibility
Lindsey McDonald, an analyst at international research firm Frost & Sullivan, says the deal makes sense.
"@lantic have stated that they wanted to double their client base and, by my reckoning, this deal almost does that," she says.
McDonald discounted integration problems by saying ISPs have got used to absorbing new customers they have bought through the automation of their systems.
"Internet customers are not particularly loyal, especially since many ISPs began offering month-to-month contracts and rely on their customers being grateful for the flexibility," she says. "I expect to see more consolidation in the sector."
According to Vox's statement, it has undertaken to maintain or improve Absa's current offering prices for the next seven years, as well as maintain e-mail addresses.
"Current e-mail addresses will continue to work until 2014," Reed says. "All customers will get new e-mail addresses in the next two years, but we'll continue to forward e-mail sent to their Absamail address for five years after that. We'll also give people the option of choosing their own personalised addresses, for example john@smithfamily.co.za."
Related stories:
Vox Telecom improves earnings
Is Vox buying Storm?