The shareholders and directors of second-tier telco Dodo will emerge as major shareholders of listed ISP Eftel after striking a deal to merge their business ClubTelco with the listed minnow.
ClubTelco is a separate business to Dodo, but was started by Dodo chief Larry Kestelman and is owned by the shareholders and directors of Dodo.
Unlike Dodo, which concentrates on the low-end consumer sector of Australia’s ISP market, ClubTelco and Eftel aim at the premium end, with a particular focus on corporate and government clients.
“ClubTelco and Eftel have similar customer profiles focusing on the premium telecommunications market, and the synergies do not stop there,” Kestelman said in a statement.
“The two businesses together constitute sufficient scale to compete effectively in the market. We are really excited by the possibilities this deal presents.”
Under the terms of the deal, Eftel will merge with ClubTelco and issue new shares to the Dodo team, who will hold 75.6% of the merged business.
In return, the Dodo team will inject $2.1 million into the business.
When combined, Eftel and ClubTelco will have 120,000 customers and $55 million in annual shareholders.
This scale should allow Eftel to better compete in an ISP market that is rapidly consolidating.
Eftel shares more than doubled on Friday after the announcement of the deal to 3.3c, valuing the entire business at $3 million.
Meanwhile, mobile content business PlayUp has announced it has raised $US50 million in capital from a group of Hong Kong shareholders to help fund growth initiatives.
The business sells games and other interactive content (including gambling) around live sport broadcast on mobile phones.
The company has attracted a star-studded share registry – celebrity shareholders including rich list members Bruce Mathieson and Allan Myers, former Australian cricket captain Steve Waugh and well-known heart surgeon Charlie Teo.
However, what really is impressive about the company is its valuation – despite having less than $US5 million in revenue, the capital raising values the business at a staggering $US200 million.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
