Australia - Telco Company Profiles - 2nd Tier

Publication Overview

This report provides an overview of the main 2nd tier telcos in Australia, including key revenue an operational data as well an analysis on company strategies in response to market developments and an intensifying competitive environment.

The companies profiled in this report are Macquarie Telecom, Vocus M2, Nextgen Networks (Nextgen Group), TPG Telecom (iiNet).

There is a separate report that covers: Australia - Telco Company Profiles - Telstra, Optus and Vodafone

Researchers:- Paul Budde, Henry Lancaster, Phil Harpur
Current publication date:- October 2016 (22nd Edition)

Executive Summary

Enormous Market Consolidation Continues in the 2nd Tier Market

Developments in this market have been dominated by industry consolidation, a process that is set to continue over coming years. Moving towards a structurally separated regulatory environment with a NBN at the horizon, size really does matter. The second tier market continues to grow strongly, in particular from Vocus and TPG, both of which continue to grow through increased scale via mergers and acquisitions. The market reached approaching $5 billion in 2016 with an annual growth rate of over 10% Growth is anticipated to subside over the next year due to market consolidation and a maturing market.

The Vocus / Merger with M2 creates Australia's fourth-largest telecommunications company and the third-largest in New Zealand. It sees a welcome strengthening of the competitive environment in Australia. The telecoms market has developed more and more into a utilities market, and in such markets size matters. It will allow the combined entity to be more efficient and more effective.

While the TPG/iiNet merger brought two similar companies together, and as such potentially reduced the number of players in the market, the Vocus/M2 combination brings two different companies together – one operating in the business market and one operating in the retail market. This will allow the companies to share resources and attract better deals from the various ICT (wholesale) providers they do business with.

TPG Telecom (iiNet)

TPG Telecom Limited provides telecoms and multimedia services in the Australian marketplace. In August 2015 TPG acquired local ISP iiNet. TPG is now Australia's second-biggest provider of fixed-line broadband in Australia with over 1.7 million customers. Services including voice, internet and data solutions are provided to a customer base ranging from the consumer market through to small and medium enterprises, corporate and government sectors. The company also owns a cloud-hosting company and the PIPE network infrastructure that includes the third largest domestic dark-fibre operation and the submarine cable network to Guam, Asia and the United States.

The company is delivering an extensive FttB service to apartment buildings in capital cities, offering broadband at 100Mb/s at a price which undercuts existing offers from rival ISPs. TPG has also secured spectrum in the 2.5GHz band to bolster its wireless broadband capabilities, and has committed to investing in additional capacity on the subsea cable linking to New Zealand and the US West Coast.

The company has the largest data network and voice network after Telstra, the largest fully converged voice, video and data IP-based access network in regional Australia, and the largest voice-enabled IP network. The company’s capabilities and reach were enhanced following its $450 million acquisition of AAPT’s wholesale and business services from Telecom New Zealand, completed in February 2014.

In 2015 TPG created a new retail arm to sell its wholesale fibre-to-the-basement product to residential customers. TPG is also active in New Zealand where it is eying potential acquisitions, both Vodafone New Zealand and 2 Degrees have been rumoured to be on the company’s hit list. Also late 2016 TPG made a surprise move TPG to become a fourth player in the Singapore mobile market.

Vocus (M2)

Vocus is an Australian based telecommunications provider with offices in Australia and New Zealand. Its services include co-location, internet, voice, fibre and ethernet services. Vocus merged with M2 Communications in 2016 and acquired Amcom in 2015, a second-tier telecommunications carrier providing fibre, cloud services, IP voice solutions, broadband, data centre, and internet services to corporate and government.Vocus’ core business centres around its carrier-grade fibre network. Services include dark fibre access, data centre services, IP Transit, Ethernet, wholesale DSL, wholesale voice and internet peering.

The Vocus / Merger with M2 creates Australia's fourth-largest telecommunications company and the third-largest in New Zealand. It sees a welcome strengthening of the competitive environment in Australia. The telecoms market has developed more and more into a utilities market, and in such markets size matters. It will allow the combined entity to be more efficient and more effective. The financial results of the telcos now all depend on who is the most cost-effective. They are both entrepreneurial companies and so they will be able to bring innovative new products and services to the market at attractive prices. Vocus’ acquisition of Nextgen Networks in June 2016, will seriously lift its position as an infrastructure based telco. The acquisition is the next and perhaps final part of a the company’s strategic plan that has also seen his firm expand geographically with the previous acquisition of Amcom and FX Networks, and diversify into the consumer space via its merger with M2.

While the TPG/iiNet merger brought two similar companies together, and as such potentially reduced the number of players in the market, the Vocus/M2 combination brings two different companies together – one operating in the business market and one operating in the retail market. This will allow the companies to share resources and attract better deals from the various ICT (wholesale) providers they do business with.

Nextgen Networks

Nextgen Networks (Nextgen) is a licensed telecommunications carrier and the company specialises in data services for carriers, service providers, government and corporations. The company was also awarded an RSP license for the NBN Co trial areas. Nextgen owns and operates one of Australia’s largest national fibre networks, of over 19,000km of fibre rings. It also operates data centre assets in all capital cities. A majority share of Leighton Holdings’ telecom assets was sold in mid-2013 to a Canadian pension fund, and was subsequently rebranded as Nextgen Group Holdings.The fibre network runs between the country’s principal capital cities of Brisbane, Sydney, Melbourne, Adelaide, Perth and Darwin and has links to nodes in regional cities and centres. The company has an extensive national Virtual Private LAN Service switched data network, the first such in Australia. The VPLS network allowed the company to become a full data service provider to the broader Australian market.

Nextgen has rolled out around 6,000km of a fibre backhaul link to Darwin, which it manages on behalf of NBN Co as part of the Regional Backbone Blackspots Program. The Perth-Singapore submarine cable, being managed by Nextgen’s subsidiary ASC International, secured landing permits in early 2014, so enabling the operator to proceed with the construction phase. In June 2016 Vocus Communications confirmed the $807 million acquisition of Nextgen.

Macquarie Telecom

Macquarie Telecom is an integrated telco providing a full range of hosting, data, voice and mobile services to the business and government market. It also offers a range of cloud services including security, storage, backup-as-a-service and virtual hosting / data centre services.  Established in 1992, Macquarie Telecom was one of the first telecommunication providers of the deregulated era and successfully publicly listed on the Australian Securities Exchange in late 1999. Macquarie’s two key target markets are Australian mid-size corporates and the government sector.  A third data centre, in Canberra bolstered the company’s hosting and cloud-based services, which remain the main focus of its strategy for growth. Macquarie Telecom sold its Intellicentre 2 datacentre to Keppel DC, a Singapore real estate investment trust. In 2016 Macquarie Telecom created three new brands: Macquarie Telecom, focused on mid-large sized business customers; Macquarie Cloud Services, focussed on tech businesses and Digi SaaS customers; and Macquarie Government, focussed on cyber security and cloud for Government customers.

Table of Contents

  • 1. Revenue statistics – 2nd Tier
    • 1.1 Total market by major players and Total Revenue
    • 1.2 Operator data into 2016
      • 1.2.1 TPG
      • 1.2.2 iiNet
      • 1.2.3 Vocus
      • 1.2.4 Macquarie Telecom
  • 2. iiNET
    • 2.1 Company information
      • 2.1.1 Overview
      • 2.1.2 Change of Ownership
    • 2.2 Financial results
      • 2.2.1 Year 2016
      • 2.2.2 Year 2015
      • 2.2.3 Year 2014
      • 2.2.4 Year 2013
      • 2.2.5 Year 2012
      • 2.2.6 Year 2011
    • 2.3 Operating results
      • 2.3.1 Subscriber statistics
    • 2.4 Company analysis
    • 2.5 Network
      • 2.5.1 Overview
      • 2.5.2 DSLAM rollout
      • 2.5.3 Dark fibre
      • 2.5.4 Fibre-to-the-Premises (FttP)
      • 2.5.5 iiNet’s plans for undersea network expansion taking shape
      • 2.5.6 WiFi rollouts in Melbourne
    • 2.6 Acquisitions, alliances and subsidiary companies
      • 2.6.1 Acquisition overview
      • 2.6.2 Partnership with Polycom
      • 2.6.3 Acquisition of ISP Westnet
      • 2.6.4 Alliance with FOX Sports
      • 2.6.5 Alliance with Hypernia
      • 2.6.6 Alliance with Hybrid Television Services
      • 2.6.7 Alliance with Hutchison
      • 2.6.8 Amcom and PowerTel acquire stake in iiNet
      • 2.6.9 Partnership with FetchTV
      • 2.6.10 Acquisition of AAPT Consumer Division
      • 2.6.11 Acquisition of Supernerd
      • 2.6.12 Acquisition of TransACT
      • 2.6.13 Acquisition of Internode
      • 2.6.14 Acquisition of Adam Internet
      • 2.6.15 Acquisition of Tech2
      • 2.6.16 Partnership with Allseen
    • 2.7 Products and services
      • 2.7.1 Home and SOHO
      • 2.7.2 Business
      • 2.7.3 Reselling agreements
    • 2.8 Company history
      • 2.8.1 Brief timeline – 1993 - 2016
  • 3. Macquarie Telecom
    • 3.1 Company information
      • 3.1.1 Overview
    • 3.2 Financial results
      • 3.2.1 FY 2016
      • 3.2.2 FY 2015
      • 3.2.3 FY 2014
      • 3.2.4 FY 2013
      • 3.2.5 FY 2012
      • 3.2.6 FY 2011
      • 3.2.7 Historical Operating revenues and statistical overview
    • 3.3 Company Analysis
      • 3.3.1 Leader in managed business services
      • 3.3.2 National Broadband Network (NBN)
    • 3.4 Data network
      • 3.4.1 Metro Access Network (MAN)
      • 3.4.2 Mobile network
      • 3.4.3 Partnership with Tata Communications
    • 3.5 Services
      • 3.5.1 Hosting solutions
      • 3.5.2 Telco
      • 3.5.3 Data centres
      • 3.5.4 Macquarie Telecom Enterprise Cloud
    • 3.6 Company history
      • 3.6.1 Brief timeline – 1992 - 2016
  • 4. Nextgen Networks
    • 4.1 Company information
      • 4.1.1 Overview
      • 4.1.2 Background information on company ownership
      • 4.1.3 Vocus set to Acquire Nextgen
      • 4.1.4 Other ownership developments
    • 4.2 NBN - Regional Backbone Blackspots Program (RBBP)
      • 4.2.1 Background information
    • 4.3 Network
      • 4.3.1 National
      • 4.3.2 International
    • 4.4 Products and services
      • 4.4.1 Introduction
      • 4.4.2 High-speed internet
      • 4.4.3 Transmission
      • 4.4.4 Data centres
      • 4.4.5 Customised data solutions
    • 4.5 Acquisitions and alliances
      • 4.5.1 Nextgen acquires Silk telecom (Silk)
      • 4.5.2 Partnership with Sydney Teleport Services
    • 4.6 Company history
      • 4.6.1 Brief timeline – 2000 - 2016
  • 5. TPG Telecom Limited
    • 5.1 Company information
      • 5.1.1 Overview
      • 5.1.2 Company structure
    • 5.2 Company analysis
      • 5.2.1 Competitive Analysis Profile
      • 5.2.2 TPG’s star continues to rise
      • 5.2.3 TPG the Champion of Competition
      • 5.2.4 TPG and the NBN
    • 5.3 Company Acquisitions
      • 5.3.1 Acquires AAPT
      • 5.3.2 Acquisition of iiNet
    • 5.4 Company Investments
      • 5.4.1 Invests in Amcom
      • 5.4.2 Invests in subsea cable
    • 5.5 Recent Company Developments
      • 5.5.1 Bid to Become the Fourth Mobile Operator in Singapore
      • 5.5.2 Dark Fibre and MVNO Agreement with Vodafone Australia
      • 5.5.3 Spectrum Acquisition
      • 5.5.4 Nationwide fibre capability for medical imaging specialist
      • 5.5.5 FTTB Services To Go Live
    • 5.6 Network
      • 5.6.1 Overview
      • 5.6.2 PIPE Networks
    • 5.7 Financial results
      • 5.7.1 Year ending July 2016
      • 5.7.2 Half year to January 2016
      • 5.7.3 Year ending July 2015
      • 5.7.4 Year ending July 2014
      • 5.7.5 Year ending July 2013
      • 5.7.6 Year ending July 2012
      • 5.7.7 Year ending July 2011
    • 5.8 Operational statistical overview
    • 5.9 Products and services
      • 5.9.1 Residential services
      • 5.9.2 Business and wholesale services
      • 5.9.3 International connectivity
      • 5.9.4 National infrastructure developments
    • 5.10 Company history
      • 5.10.1 Brief timeline – 1999 - 2016
  • 6. Vocus – M2
    • 6.1 Vocus
      • 6.1.1 Financial Results - FY2016
      • 6.1.2 Operations Results - FY2016
      • 6.1.3 Overview
      • 6.1.4 Company analysis
      • 6.1.5 Acquisitions / Mergers
      • 6.1.6 Network
      • 6.1.7 Recent Developments
      • 6.1.8 Financial Results
      • 6.1.9 Data Centres
      • 6.1.10 Products and Services
    • 6.2 M2 Communications
      • 6.2.1 Overview
      • 6.2.2 Financial results
      • 6.2.3 Services
      • 6.2.4 Products and services
      • 6.2.5 Acquisitions
    • 6.3 Amcom
      • 6.3.1 Company Overview
      • 6.3.2 Financial results - historical
      • 6.3.3 Network
      • 6.3.4 Acquisitions, alliances and subsidiary companies
      • 6.3.5 Products and services
      • 6.3.6 Brief timeline 1988-2015
      • Table 1 –Second-tier telcos – total revenue ($ million) and annual change – 2010 - 2017
      • Table 2 –Second-tier telcos – revenue ($ million) by major provider – 2014 - 2016
      • Table 3 –Second-tier telcos – revenue by major provider – annual change – 2015 - 2016
      • Table 4 –Second-tier telcos – Revenue Market Share revenue by major provider – 2016
      • Table 5 – Historic - Second-tier telcos – revenue by provider – 2010 - 2014
      • Table 6 – Historic - Second-tier telcos – revenue by major provider – annual change – 2010 - 2014
      • Table 7 – Historic - Second-tier telcos – revenue by major provider – relative market shares – 2010 - 2014
      • Table 8 – Historic - Second-tier telcos – revenue by provider (historic) – 2004 - 2007
      • Table 9 – Historic - Second-tier telcos – revenue by major provider – relative market shares – 2004 - 2007
      • Table 10 – TPG revenue and annual change – 2001 - 2016
      • Table 12 – TPG – revenue ($ million) breakdown by division – 2009 – 2016
      • Table 13 – iiNet total revenue – 2004 - 2016
      • Table 14 – iiNet – revenue breakdown by market segment – 2015 - 2016
      • Table 15 – iiNet key financial statistics – 2007 - 2016
      • Table 16 – Vocus key financial parameters – 2016
      • Table 17 – Macquarie key financial indicators – 2008 - 2016
      • Table 18 – Macquarie revenue by division – 2015 - 2016
      • Table 19 – iiNet total revenue – 2004 - 2016
      • Table 20 – iiNet – revenue breakdown by market segment – 2015 - 2016
      • Table 21 – iiNet key financial statistics – 2007 - 2016
      • Table 22 – iiNet ARPU by service – 2008 - 2014
      • Table 23 – iiNet total revenue (historic) – 1997 - 2003
      • Table 24 – iiNet – Broadband Subscribers (thousands) by Product – 2015 - 2016
      • Table 26 – Historic - iiNet active subscribers – 2005 - 2015
      • Table 27 – iiNet internet subscribers by type – 2007 - 2014
      • Table 28 – iiNet voice subscribers by type – 2007 - 2014
      • Table 29 – iiNet DSLAM exchanges – 2009; 2011 - 2012
      • Table 30 – iiNet’s acquisitions – 2003 - 2014
      • Table 31 – Internode ADSL2+ statistical overview – 2006 - 2012
      • Table 32 – iiNet business revenue – 2009 - 2014
      • Table 33 – Macquarie key financial indicators – 2008 - 2016
      • Table 34 – Macquarie revenue by division – 2015 - 2016
      • Table 35 – Macquarie revenue by division – 2004 - 2015
      • Table 36 – Historic - Macquarie revenue by division – 2004 - 2014
      • Table 37 – Historic - Macquarie – annual change in revenue by division – 2005 - 2014
      • Table 38 – Historic - Macquarie – revenue contribution by division – 2004 - 2014
      • Table 39 – TPG revenue and annual change – 2001 - 2016
      • Table 40 – TPG consumer – revenue breakdown by market segment (consumer) – 2010 - 2016
      • Table 41 – TPG – revenue ($ million) breakdown by division – 2009 – 2016
      • Table 42 – TPG – broadband ARPU – 2009 - 2016
      • Table 43 – TPG – Revenue by Division – 2016
      • Table 44 – TPG – Consumer Broadband Subscribers (thousands) by Product – 2014 - 2016
      • Table 45 – iiNet – Broadband Subscribers (thousands) by Product – 2015 - 2016
      • Table 46 – TPG – Group Mobile Subscribers (thousands) by Division– 2014 - 2016
      • Table 47 – TPG Group – Total Subscribers, Mobile Subscribers – Jan 2016
      • Table 48 – TPG (only) – broadband subscribers on/off-net and bundled – 2008 - 2016
      • Table 49 – Historic - TPG on-net versus Soul off-net home phone subscribers, annual change – 2009 - 2015
      • Table 50 – Historic - TPG versus Soul mobile subscribers – 2008 - 2015
      • Table 51 – Vocus key financial parameters – 2016
      • Table 52 – Vocus - key financial parameters
      • Table 53 – M2 key financial parameters – 2015
      • Table 54 – M2 revenue makeup and annual change – 2004 - 2015
      • Table 55 – M2 key financial performance indicators – 2004 - 2015
      • Table 56 – M2 key financial parameters – 2013 - 2014
      • Table 57 – M2 revenue by segment– FY2014
      • Table 58 – M2 revenue by product – FY2014
      • Table 59 – M2 key financial parameters – 2012 - 2013
      • Table 60 – M2 voice services performance indicators – 2013 - 2015
      • Table 61 – M2 mobile services performance indicators – 2013 - 2014
      • Table 62 – M2 internet services performance indicators – 2013 - 2014
      • Table 63 – M2 energy services performance indicators – 2013 - 2014
      • Table 64 – M2’s acquisitions – 2005 - 2013
      • Table 65 – Amcom – operating revenue – 2000 - 2014
      • Table 66 – Amcom – key financial indicators – 2010 - 2014
      • Table 67 – Amcom – EPS – 2010 - 2014
      • Table 68 – Amcom revenue by service division – 2004 - 2013
      • Table 69 – Amcom revenue by service division – 2012 - 2014
      • Table 70 – Amcom’s acquisitions – 2001 - 2014
      • Chart 1 –Second-tier telcos – total revenue ($ million) and annual change – 2010 – 2017
      • Chart 2 – Overview of Amcom revenue – 2000 - 2014
      • Chart 3 – Overview of Amcom – key financial indicators – 2010 - 2014
      • Chart 4 – Overview of Amcom – revenue by service division – 2009 - 2013
      • Exhibit 1 – iiNet Limited (iiNet) at a glance
      • Exhibit 2 – TransACT Communications Pty Ltd (TransACT) at a glance – 2011
      • Exhibit 3 – Network FttK coverage
      • Exhibit 4 – Broadband ISPs over TransACT network
      • Exhibit 5 – TransACT brief company history
      • Exhibit 6 – Internode Pty Limited (Internode) at a glance – 2012
      • Exhibit 7 – Internode brief company history
      • Exhibit 8 – Macquarie Telecom (Macquarie) at a glance
      • Exhibit 9 – Macquarie Telecom data network PoPs
      • Exhibit 10 – Nextgen Networks Pty Limited (Nextgen Group Holdings) at a glance
      • Exhibit 11 – The Regional Backbone Blackspots Program – completed rollouts
      • Exhibit 12 – An overview of the blackspots program rollout
      • Exhibit 13 – Nextgen network distances and construction dates
      • Exhibit 14 – TPG Telecom Limited (TPG) at a glance – including key results
      • Exhibit 15 – TPG – Competitive Analysis Profile – Highlights
      • Exhibit 16 – TPG – Competitive Analysis Profile
      • Exhibit 17 – M2 Telecommunications Group Limited (M2) at a glance
      • Exhibit 18 – M2 services and target market by brand
      • Exhibit 19 – Primus Telecommunications Australia at a glance
      • Exhibit 20 – Primus brief company history
      • Exhibit 21 – Amcom Telecommunications Limited (Amcom) at a glance - historical
      • Exhibit 22 – Subsidiary companies
      • Exhibit 23 – Amcom – overview of products and services by division

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Companies (Major Players)

Number of pages 134

Status Current

Last updated 26 Oct 2016
Update History

Lead Analyst: Paul Budde

Contributing Analysts:

Phil Harpur
Henry Lancaster

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