Ringing the changes: telecoms deals in Australia have soared in 2022

Data Insight Dealspeak 3 May

Ringing the changes: telecoms deals in Australia have soared in 2022

By Riccardo Ghia

APAC dealmakers have been putting in the calls Down Under.

M&A activity in Australia’s telecoms sector rocketed to USD 5.4bn in the first four months of the year – its highest value year-to-date (YTD) since 2009 – accounting for 41.7% of the total value of transactions in the industry across Asia-Pacific.

Numbers have been boosted by two major deals, which rank as the eighth- and ninth-largest telecoms tie-ups globally since the start of 2022, according to Dealogic data:

A USD 2.7bn bid for Australia fiber infrastructure owner Uniti Group [ASX:UWL] from an investment consortium led by New Zealand’s HRL Morrison.
The proposed acquisition of Australian telecoms tower business Axicom by AustralianSuper and Singtel’s [SGX: Z74] Australia Tower Network (ATN) for a similar figure. If successful Axicom and ATN are set to merge.

The corporate connections do not end there. The rumor mill continues to buzz with chatter about further large-scale transactions in the pipeline, as company disposals and reorganizations free up cash for investment in 5G network upgrades.

Singaporean telecoms giant Singtel, which sold a 70% stake in ATN to AustralianSuper last November, is focused on unlocking value in its infrastructure assets and boosting its data-center platform.

In January, sources told Bloomberg that Singtel is considering its options, including a potential sale of a stake in the fiber assets of its Australian subsidiary, SingTel Optus.

In February, The Australian reported that TPG Telecom [ASX:TPG] could be considering demerging its infrastructure assets. More recently, the same newspaper reported that first-round bids for BAI Communications’ broadcast tower portfolio – which generates EBITDA of around AUD 180m (USD 134m) – are due in mid-May.

Next generation: potential dealmakers of the future

Australia’s telecoms infrastructure sector offers a safe haven to risk-averse investors sitting on cash war chests built up during the pandemic, but at a time of rising geopolitical tensions. Competition for a limited supply of such assets is likely to be fierce.

Potential buyers include AustralianSuper, the country’s largest superannuation and pension fund, which says it continues to seek local and global investments in the telecommunications sector following the Axicom deal.

Other infrastructure names such as Macquarie Infrastructure and Real Assets (MIRA) and Aware Super, Brookfield, Commonwealth Superannuation Corp, Sunsuper and the Future Fund are also likely to enter the fray, according to Australian Financial Review.

In March, The Australian reported that Vocus, a major Australian telecoms player owned by MIRA and Aware Super, could be seeking buyers for its retail division. This potentially represents another M&A opportunity albeit one for funds rather than strategic players.

Dealreporter, a sister publication within ION Group, reported earlier this year that the Australian regulator, ACCC, has serious concerns about consolidation in the retail telecoms sector given that TPG Telecom [ASX:TPG], Telstra [ASX:TLS], Optus and Vocus have a 91% share of the retail broadband market.

However, deal-making is unlikely to be confined to the big guns. Small and mid-market operators are also expected to dial up M&A activity to cater for customers’ demands for digital transformation and more specialist services, as Mergermarket reported in November.