news National telecommunications company M2 this morning revealed it had plans to make another 150 positions redundant, just five months after culling 100 staff from its operations.
M2 has emerged over the past several years as one of the fastest-growing telcos in Australia’s telecommunications sector, with acquisition being the main method which the company has been employing to put on scale and compete with larger rivals.
The company made headlines in April 2012 when it unexpectedly revealed it would buy the Australian operations of Primus Telecom. At that stage, M2 already operated the Commander, People Telecom, M2 Telecom, M2 Wholesale, Southern Cross Telco, GreenMobiles and Simply Mobiles brands.
The acquisition delivered M2 about 165,000 customer contracts, (comprising a mix of residential, SME, corporate and wholesale customers), power over the iPrimus and Primus brands in Australia, some 500 staff, and a significant amount of telecommunications infrastructure, including datacentres and metropolitan fibre network infrastructure. Primus also had about 286 DSLAMs deployed in telephone exchanges around Australia.
Subsequently, in March 2013 M2 bought another couple of sizable ISPs in the form of Dodo and Eftel. Dodo had over 400,000 customers and some 660,000 active Internet services, as well as more than 45,000 active energy customers. In comparison, Eftel had over 130,000 active Internet services, and had previously bought a number of other businesses, such as the October 2012 purchase of broadband and VoIP company Engin.
The acquisitions made M2 one of the largest ISPs in Australia, behind Telstra, Optus and iiNet and approaching somewhere near TPG. However, they also came at a cost. In late October last year, M2 revealed plans to make about 100 staff redundant as it finished digesting recent major Internet service provider acquisitions such as Dodo, Primus and Eftel, stating that the positions were not necessary in the newly merged business.
“We take this decision and the impact on our team very seriously.” said M2 CEO, Geoff Horth (pictured) at the time, “This was a carefully-considered and difficult decision. We place a high value on our team so today we are committed to spending time with affected team members and we will be working over the course of this week to explore all possible avenues for redeployment.”
This morning, M2 revealed in an extremely brief statement to the Australian Stock Exchange that it was planning to cut a further 150 roles. “M2 Group Ltd has today commenced a process of consultation regarding a potential restructure of its business due to role duplication experienced from the acquisitive growth of the company over the last two years,” the company said.
“The company’s acquisition integration program has recently identified approximately 150 roles across administration, customer service, technology, provisioning and sales that may become redundant. Any proposed changes will be discussed with team members in the consultation process, during which time the company will confirm the structure required to support the future operational requirements of the business.”
Horth said this morning: “We very carefully consider any change that may affect our team and we enter into the consultation process with the aim of minimising any potential impact on the team and maximising redeployment opportunities. This decision was not made lightly and we take any impact on our team very seriously.”
The redundancies come despite the fact that M2 has recently delivered record revenue and earnings. In its financial results for the half-year ended 31 December last year (PDF), the company pulled in revenue up 66 percent to $506 million, EBITDA up 38 percent to $75.8 million and net profits after tax up 26 percent to $30.9 million. The company issued a fully franked interim divident of 11.5 cents per share at the time, an increase of 15 percent on the previous corresponding period.
“I am pleased to deliver on our promise of excellent organic growth, with a net addition of 50,000 services, while maintaining our strong financial performance and increasing returns to shareholders,” said Horth at the time. “This achievement was possible due to the tireless efforts of our team and I would like to thank them all for their contributions.”
At the time, the company said it had more than 3,000 team members in total, making the 250 total roles affected over the past five months significant in terms of its wider headcount.
opinion/analysis
I’m a small business owner and a capitalist myself, so I’m not going to criticise M2’s moves here too heavily. However, I will say that the company has quite some gall, to book-end a huge revenue and profit increase with substantial redundancies. It looks from the outside as though M2 is taking the approach that we’ve seen elsewhere in Australia’s telecommunications sector: Of acquiring constantly to gain scale and then cutting headcount substantially in the acquired groups with a view to boosting profitability and the ability to pay down debt and acquire further.
It’s a valid approach commercially as long as customer service and operational outcomes maintain sufficient levels to stop customers deserting the acquired brands. But it’s a bit of a mercenary look, and I’m sure the staff being made redundant won’t appreciate the slightly cold approach M2 is taking to the situation. As Horth explicitly said just several months ago, when announcing the record financial results, the achievement was possible due to the “tireless efforts” of M2’s staff. Those same people whose jobs appear increasingly uncertain.
Image credit (headshot of Horth): M2
I heard that the 100 last year were not the only ones, a couple of months before at least a couple of dozen people were cut quietly in a minor shake up.
Of course they are cutting heads – they can’t acquire anyone else really, they are nowhere near integrating those they have bought and anyone sizable enough to deliver decent enough impact to EBIT has gone to competitors or is going to be too expensive now – with fewer small – to medium sized telcos no doubt those remaining will trade at higher EBIT multiples than they were a few years back.
The strategy to deliver optimal share price by acquiring a company every year, realizing synergies (yes, cutting staff), bolting on EBIT and then doing the same before anyone can really tell the impact on numbers of the last one is probably coming to an end.
So what now? Make a play for smaller players, cut costs, offshore, cut staff, etc. I see they have invested in telcoinabox, aggregato – the former would probably be a realistic target given their fresh approach to wholesale. Look back at M2’s reports – wholesale has kept them afloat whilst they’ve hemorrhaged SMB, SME customers as others have got better in that field.
“This decision was not made lightly and we take any impact on our team very seriously.”
As one of the growing army of the telco retrenched, I can assure you that statements like this provide absolutely no comfort to the soon-to-be unemployed.
Just sayin’
Unfortunately spot on.
I bet senior management are still there, pretty easy to sack people at the coal face to make the numbers..
How many of them actually roll sleeves up and add value, rather than talk the talk..
Another mirror of AAPT’s position after TPG’s acquisition…
was going to say i don’t see a story about how many AAPT have lost since TPG took over
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