It's an interesting move with the smaller business, MyNetFone that has revenues or about $12M buying the larger entity whose revenues in the order of $25M. Rene Sugo, a director and founder of MyNetFone and Symbio Networks, told us that the independent directors of MyNetFone were trying to "strengthen MyNetFone".
"The current view is that to strengthen MyNetFone, it needs security over its infrastructure. It's basically using a managed service from Symbio and external parties, when the come and look at MyNetFone, ask that if they invest in MyNetFone won't be taken for a ride by Symbio" explained Sugo.
As well as supplying MyNetFone with call termination, call origination, number porting and hosted VoIP solutions Symbio has a number of other clients. Despite Symbio being founded by Sugo and Andy Fung, who both founded and are directors of MyNetFone, Sugo revealed that MyNetFone wasn't Symbio's biggest client in terms of revenue. However, MyNetFone's other directors wanted assurance that the business wouldn't be impacted adversely should Symbio land another large client.
As MyNetFone is an ASX listed company (ASX:MNF), it was in a trading suspension as it was reporting its annual results at the time the deal was announced. Symbio's other major customers were briefed on the deal once it had been signed off. According to Sugo, none had any concerns about the deal.
Sugo told us that Symbio would "continue its strategy of wholesale. We're going to run it as a wholly owned subsidiary and address the wholesale market in Australia and overseas. Wholesale has the capacity to grow very quickly".
Like everyone playing in the Internet market, Sugo sees the NBN as a significant opportunity. "I see NBN as a huge potential churn event when people are faced with the decision to get rid of their home copper lines. With Symbio we've got number portability with the major carriers so we can port those numbers into the cloud. The growth story is yet to come".
"NBN has the potential to level the playing field. We missed the boat on building DSLAMs because we were focussing on voice and other guys got the headstart. We're reselling Optus and Telstra DSL but in the reseller's game the margins are really small. When NBN comes we can grow residential" said Sugo. It's clear from Sugo that he sees MyNetFone pushing into the ISP business when the NBN reaches greater penetration and density.
Existing customers of Symbio and MyNetFone won't see any changes to their current service delivery. "We've always operated the two companies very separately because of disclosure reasons. Management isn't going to change. The only difference is that from a reporting point of view we'll report one consolidated entity" explained Sugo.
The deal is still subject to approval by an independent expert to ensure that transaction satisfies ASIC requirements.
MyNetFone had one of its business trading days in recent weeks yesterday with 42000 shares traded and the price falling 11% to $0.16.