And Russell says the fibre business is just getting started on fulfilling its full potential.
“Vocus has great assets and great market opportunity but there are ongoing improvements that we will have to deliver on, we are not the finished article yet,” he said.
“Our market share is still low relative to (the size of) our network, we have had a good couple of years but we have share to gain. ”
Telecommunications infrastructure has become increasingly attractive to investors looking for steady returns. 5G might be the talk of the town but the technology relies on fibre for backhaul, which makes networks like Vocus’ even more attractive.
Aware Super, which has teamed up with Macquarie in carrying out due diligence on Vocus, recently lost out to junior telco Uniti in the race to buy fibre broadband operator OptiComm and is clearly keen on adding fibre to its portfolio. Meanwhile, Macquarie already owns wireless tower operator Axicom and data services company Air Trunk, making Vocus’s fibre the perfect fit.
Russell is also confident that the overall market sentiment is working in Vocus’ favour, irrespective of whether MIRA’s non-binding offer firms up or not.
“There is absolutely a serious market trend where demand for bandwidth (is going up) and high capacity connectivity is central to that. That’s where we play.”
“Over the COVID period fibre has stood out as essential infrastructure and what we are seeing is that people are investing in fibre capability, what’s important for us is to reflect on the assets we have and continue to strengthen and expand them,” he says.
Dodo, iPrimus the likely talking point
The appeal of Vocus’ fibre business has been well recognised by the market for some time and any concrete offer for the telco will inevitably draw attention to its consumer broadband business, which includes Dodo and iPrimus.
The fate of this underperforming business has been under a cloud for some time. The shift to the National Broadband Network (NBN) has forced retail service providers to make do with thinner margins and injected a lot more competition in the market.
The prevailing sentiment is that Vocus is better off without Dodo and iPrimus and a new owner will most likely cut the consumer division loose.
But Russell isn’t ready to give up just yet.
“We have done the hard work, the business is stabilised on the consumer side and we have opportunities to grow the products and brands,” he says.
“I think the overall market, from a retail pricing stand point, will move, strategies will change and that I think will improve profitability for retail (telco) businesses.”
It’s a bullish outlook for a market that for the moment remains subdued, where standing out from the crowd is easier said than done. Vocus’ retail business posted a 6 per cent decline for the half (year-on-year) to $360 million. Underlying earnings slumped 20 per cent (year on year), to $32.7 million. While there are signs of growth, its debatable whether a new owner would have the patience needed to shepherd Dodo and iPrimus into safety.
Having delivered on the promise to revive Vocus, Russell and company chairman Bob Mansfield must now ponder if the next step for the telco should be taken under the stewardship of new owners.
“This is an evaluation that may be made as part of the process (underway), where that goes and whether there is a binding offer I don’t know, I don’t think anyone knows.”
“If it does come to a binding offer then shareholders will evaluate that and I am sure they will ask that question,” Russell says.
Technology and business journalist, with digital experience.
Stints at Business Spectator, The Australian. Better than average cook, pretty handy with knives and guitar.