New Vocus structure to see enterprise, retail businesses operate autonomously

Vocus to split out financials for Vocus Networks, retail, and NZ businesses

Vocus will effectively operate as three standalone business units as part of a structure detailed today by the telco’s chief executive, Kevin Russell.

The company plans to include separate financials for its Australian consumer arm, network services business and New Zealand business in its full year results, which will be reported in August.

“We want the market to have visibility of where the value is, what businesses are performing well when you allocate the costs so properly,” the CEO told a strategy briefing.

Russell said that reporting the performance separately would allow Vocus to potentially look at “whether some of these business units can be realised.”

“That’s absolutely not the plan today,” he added. “But it's good to have optionality.”

“We need to win in market and we need to be nimble so the retail business needs to be separate, the New Zealand business operates separately,” the CEO said.

(Vocus previously contemplated the sale of its NZ arm.)

The telco today provided FY20 guidance. Vocus said it expects underlying EBITDA of $350 million to $370 million, with growth in Vocus Network Services of $20 million to $30 million offset by a decline in Vocus Retail.

Vocus Network Services includes the telco’s enterprise, government and wholesale business.

“Our core business is Vocus Networks,” Russell said. “That's where the core strategic strategy assets lie. That’s where the core value creation opportunity lies. Making that statement unambiguous, unambiguous within the organisation is helpful, because what does it mean? It means discretionary capital goes to Vocus Networks first and foremost.”

“The other businesses provide supporting roles and will build value, but we have to get Vocus Networks right,” he added.

In February, Vocus released its half year results, revealing a 12 per cent decline in revenue for its consumer business, with SMB revenue down 27 per cent. Underlying EBITDA was down 5 per cent and 29 per cent, respectively. Vocus New Zealand grew revenue by 4 per cent, with EBITDA up 10 percent.

The enterprise, government and wholesale business of Vocus Networks enjoyed 27 per cent revenue growth in the half, with underlying EBITDA up 5.5 per cent.

Russell told a briefing on the half-year results that Vocus would no longer seek to grow its share of the NBN consumer market; instead it intended to “focus on optimising the broadband experience for existing customers.”

Over the last two years Vocus has been subject to a number of tentative unsolicited acquisition bids — most recently from AGL — but none of the group’s potential purchasers have followed through with an offer following a due diligence process.

Russell today described the AGL and recent EQT bids as “completely and utterly unsolicited, and, frankly, a distraction.”

“We've never had one syllable of discussion about tarting this company up for sale,” he said.“We've never had a ‘for sale’ sign on the company, but some people see some things in the makeup of the company that attracts attention and that's exactly what happened with the two bids that we received.”

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