news Australia’s number two telco Optus this morning revealed it would buy wireless broadband player Vividwireless from its parent the Seven Group, for a total cost of $230 million, in a move which Optus said will birth a new 4G mobile broadband network in Australia.
Much of the asset base of Vividwireless is believed to have come from Unwired, which was acquired by Seven for about $127 million in late 2007, as its plan to conquer Australia’s mobile broadband market through using the burgeoning WiMax standard was rapidly coming undone through the encroaching popularity of third-generation mobile broadband networks launched by companies like Telstra, Optus and Vodafone. It had previously counted chip giant Intel among its investors.
In a statement released this morning, Optus said the deal would eliver it access to up to 98Mhz of wireless spectrum in the 2.3GHz band — a band which was already used by “some of the world’s leading operators” to provide 4G services. 4G is a term used to describe the next generation of wireless broadband services, which will allow speeds up to levels such as 100Mbps — far beyond the current generation of 3G services.
Optus said it planned to use this spectrum “to build a new 4G network using LTE-TDD technology”.
“This new network will deliver wireless broadband to households and businesses in metropolitan Australia, with typical download speeds ranging from 25Mbps to 87Mbps — twice as fast as existing competitive 4G services,” said Optus. “It will be integrated with Optus’ 1800MHz network, which will be launched in Newcastle and the Hunter region of NSW in April 2012.”
Paul O’Sullivan, Optus Chief Executive said: “The acquisition of Vividwireless will give Optus a significant increase in network capacity to address the next wave of data growth that is just around the corner. By integrating it with our current 4G rollout (in the 1800MHz band), we will be able to provide increased mobile speeds to our customers in metropolitan Australia.”
“Optus was born out of a desire to provide choice and competition to Australians for telecommunications services. Today’s announcement demonstrates our commitment to being a leader in 4G and in providing Australians with a range of high speed mobile services. This is an important step in our vision to lead the industry in customer experience by delivering relevant content and applications anywhere, on any device,” O’Sullivan said.
Peter Gammell, Chief Executive Officer of Seven Group Holdings said: “We are proud of our achievements with Vividwireless. For Seven Group Holdings this sale recognises value for the investment we’ve made in Vividwireless. Optus’ expertise will allow the business to grow into the future and take the pioneering work we’ve done in 4G to the next level.”
The acquisition includes the transfer of Vividwireless’ operating businesses, customers, spectrum licences and existing wireless broadband network. Optus will also need to pay a substantial fee — estimated at $50 million — to the Australian Communications and Media Authority for the reissue of the spectrum. In a separate statement, Optus parent SinTel said the consolidated net asset value of Vividwireless based on its 30 June 2011 financial statements was approximately $11 million.
Vividwireless will continue to provide services to its customers with Optus planning to migrate customers to the upgraded LTE network as rollout progresses.
In a later statement issued by an Optus spokesperson in reply to questions from Delimiter, the company said that Vividwireless will continue to provide services to its customers post the acquisition, with Optus planning to migrate customers to the upgraded LTE network as rollout progresses.
With respect to the issue of whether the new 4G network will be data-only or will also support mobile telephony, the statement said: “Like all current 4G networks it will initially be a 4G data network but we expect a rich ecosystem to develop with a variety of devices like smartphones etc being available.” The company noted that customers will be able to access both the 1800Mhz and 2.3Ghz spectrum bands, referring to the “integration” part of its original statement. Network vendors for the planned 4G rollout had not been finalised, as the Vividwireless transaction had not been completed, they said.
The news comes as rival telcos Telstra and Vodafone have also been developing their 4G offerings. Telstra has already launched its fledgling 4G network in CBD areas, while Vodafone is still testing its offering in certain regions.
This acquisition appears to be almost purely about access to spectrum — spectrum which Optus needs to build out its 4G network and compete with Telstra. Vividwireless (and Unwired before it), was broadly unsuccessful in its business model of launching fixed wireless broadband services in Australia, and while the company has some customers, it’s not building any scale at any speed. The existing 3G mobile broadband networks have simply offered too much competition for the company to grow at any decent rate. It had to die at some point and this looks like that point.
In addition, with this acquisition, it appears as if Optus has finally been able to convince its parent SingTel to unlock the purse strings for Australian acquisitions, if only in its core mobile market. This bodes well for Optus — it indicates that the company is becoming more flexible. Optus missed the acquisitions of AAPT, Internode, TransACT and more in the fixed broadband market. It can’t afford to keep doing so. Perhaps we’ll see a more active Optus in the near future.
On a final note, I must add that I am disappointed that Optus didn’t hold a press conference this morning to announce the Vividwireless acquisition. In years gone by, for major company moves like this, Optus CEO Paul O’Sullivan would have fronted journalists and taken questions on the issue. Today, all we have is a brief media release issued unexpectedly in the dead of Monday morning. As a company, Optus is gradually becoming less transparent over the years, and that’s not a good thing.
Image credit: Optus