2degrees and Orcon Group to merge

4 Jan 2022

New Zealand telcos 2degrees and Orcon Group have announced plans to merge, forming the country’s third-largest integrated telecoms provider. The two companies claim the deal creates an even stronger challenger in the New Zealand telecommunications market with a comprehensive service and infrastructure offering across mobile, broadband, and energy services.

The merger follows the announcement that Macquarie Asset Management and Aware Super, owners of Vocus Group and its New Zealand subsidiary Orcon (formerly known as Vocus NZ), had signed an agreement to acquire 100% of 2degrees from Trilogy International Partners (TIP) and its minority partner Tesbrit, through a newly established entity named Voyage Digital. TIP, which owns 73.17% of the equity in 2degrees, first announced discussions with Macquarie and Aware Super regarding a potential merger in October 2021. According to TIP, the deal gives 2degrees an enterprise value of NZD1.70 billion (USD1.158 billion), including lease liabilities, representing an EV/EBITDA multiple of 8.9x based on results for the twelve months to 30 September 2021. On a cash and debt free basis, the purchase price represents an equity value of NZD1.315 billion. The acquisition is expected to be completed in the first half of 2022, subject to regulatory approvals.

Commenting on the deal, 2degrees CEO Mark Aue said: ‘Combining the strengths of our respective businesses and the talents of our people will enable us to continue to innovate, enhance our product and service offering to benefit all Kiwis, and to further grow the new business.’ Orcon CEO Mark Callander added: ‘This transaction marks a step change in the New Zealand telecommunications landscape and will establish a stronger player in the market, and this will lead to more competition and benefits to end users.’

The combined company would service more than 1.5 million mobile customers and 345,000 fixed line customers across 1,800 mobile cell sites and 4,600km of fibre and provide network coverage of 98.5% of places Kiwis live and work.