M2 Telecom pays $5m for mobile customers of Edirect (VIP-Tel)

Stuart Corner
Thursday, 07 April 2011 11:08

IT Industry - Deals

M2 Telecommunications Group (ASX: MTU) has acquired for $5m more than 50,000 postpaid mobile phone customers from bankrupt mobile services reseller, Edirect - which provides mobile services under the VIP-tel brand and which this week became the target of a second legal action by the ACCC for alleged breaches of the Trade Practices Act.

M2 has also acquired the operating assets and systems presently used to service these customers. Edirect is a long-standing wholesale customer of M2 and the VIP-Tel customers will be absorbed into M2's existing operations.

Earlier this week the ACCC announced that it was taking Edirect to court for, allegedly, signing up customers to mobile services when it knew they were outside the coverage area of the service it provided, on the Optus network.

That action followed one initiated by the ACCC against Edirect in August 2010 with a long list of allegations of horrendous unconscionable and misleading telemarketing practices.

M2 says it intends to conduct a restructure of the Edirect operations and a consolidation of the Edirect customer base, in order to ensure that a sustainable and stable customer base is in place going forward.

"The'¦restructuring'¦will incur certain once-off expenses which will result in the assets acquired not delivering material earnings contributions in the remaining months of the 2011 financial year (FY11) nor in FY12," M2 said in a statement to the ASX.

Post-restructure, it anticipates and EBITDA contribution in FY13 of approximately $2m. M2's CEO and Managing Director, Vaughan Bowen, said: "Bringing the Edirect customer base and operations into the M2 fold is a positive outcome, as it provides us with both a greater level of control over the assets and the opportunity to add value through the cross-promotion of other services over time."