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Australia's Vocus buys Maxnet

Vocus Communications [ASX: VOC] says it has entered into a binding agreement to acquire Maxnet, the New Zealand ISP and data centre and cloud services provider, for $9.5 million.

In a statement, Maxnet said it expects to generate ebitda of $2m in its 2013 financial year.

Maxnet's largest shareholder is chairman Douglas Kelmsley, who owns 45.9% of the company.

Maxnet was recently in the news when it launched a new sub-brand internet service, branded FYX, which offered a so-called "Global Mode" that allowed customers to easily access offshore content usually barred to New Zealanders.

Popular wisdom was that Sky TV, TVNZ or MediaWorks content providers had complained to Maxnet.

That was Sky TV CEO John Fellet's guess.

The traditional broadcaster themselves pleaded ignorance.

NBR ONLINE  understands that and, in fact, FYX boss Andrew Schick and Maxnet CEO John Hanna were both keen to keep the global mode service.

However, "the board bottled it", according to a person close to the company.

The insider says the change of heart occurred after the company "got a negative legal opinion from across the Tasman".

But speaking to NBR ONLINE this afternoon, Vocus CEO James Spenceley said there was no legal threat, or legal opinion.

"No one stomped on FYX," he said. 

Rather, during the complex and sensitive discussions round the takeover, it was considered better to put FYX's Global Mode on hold.

Vocus did not ask for the Global Mode to be shut off. Asked if Maxnet's board had made the decision, Mr Spenceley said: "I believe so."

He raved about FYX, calling it "a very forward thinking product that challenges some archaic ideas of bounderies in the international world".

But would Maxnet's new owner bring it back.

On this point, the Vocus boss was more cagey. He said his immediate focus was on closing the deal over the next four weeks, logistical areas such as merging IT systems and meeting customers.

Maxnet said its legal advice matched comments to NBR ONLINE by Chapman Tripp, which suggested FYX was within New Zealand law (if not the contractual terms and conditions of the likes of Netflix and Hulu).

Publicly listed Vocus was perhaps more conservative as it finalised the acquisition - or just more conservative full stop.

Maxnet owns and operates one of Auckland’s best known and premier Data Centres located just outside the Auckland CBD in Albany.

Vocus sells data centre services and international fibre capacity across Australia, New Zealand, Singapore and the US.

The acquisition will be funded with bank debt. Vocus had ebitda of $A7.6m last year on revenue of $A30m.

Its New Zealand business has been focused on selling ISPs wholesale access to the Southern Cross Cable.

Mr Spenceley said Vocus supplied New Zealand ISPs with 20% to 25% of their wholesale international bandwidth.

With its Maxnet buy, the company was looking to move into the data centre retail market as well, as it already had across the Tasman.

More by Chris Keall

Comments and questions

uncool that a SX [Southern Cross Cable] wholesaler is dipping in to NZ retail

this is a good news story and the networking available should ultimately enable more competition in the local market and bring things like voice termination costs down benefiting everyone, IMHO

So now ISP's have to make a choice, support Vocus via wholesale until they eventually cut into their space or sort it out now by leaving. It will sure be interesting.

Is Vocus the next Telecom Wholesale to buy bulk directly from Southern Cross cable and subdivide to sell to smaller ISP?

Who is Vocus buying next? FX or Orcon? Maxnet is only the entree I believe. The mains are not served yet.

My money is on Orcon

More like who is buying vocus ???