Vox Telecom buys Storm for R360m
Storm provides voice and data services, offering voice calls over the internet, least-cost routing to divert calls onto the cheapest cellular network, and callback services, where users avoid international calling fees. Its internet arm provides corporate internet services and is SA’s fifth-largest consumer-focused player.
It generates income of R22m a month from about 6000 customers, including public and private corporations.
Vox Telecom CEO Douglas Reed said the deal would materially improve the scale and position of its operations and ramp up its position in the market for voice over internet protocol (VoIP). The consolidation would also result in cost savings through economies of scale.
The deal is subject to conditions including exchange control approval and a green light from the competition authorities.
Storm CEO Willem van Rensburg said the deal would be good for his customers as they would still benefit from the current services, and would gain from economies of scale and the option of other services available from Vox.
Last week Vox announced plans to buy Absa’s internet access division for an undisclosed amount. Absa runs the third largest consumer-based internet service with 68000 customers.
Vox Telecom chairman Tony van Marken said the company would keep looking for acquisitions that were accretive to its earnings and would improve its size and position in the telecoms market. But consolidation is coming fast among the smaller players. Late last year Vox — then trading as DataPro — paid R380m for Orion Telecoms, a specialist in least-cost routing and callback services. Orion had revenue of R680m and a net profit of R47m in its last financial year.
James Herbst, financial director of another rival, the Huge Group, said the price being paid for Storm showed how expensive the few remaining potential target companies had become.
Storm had monthly revenue of R22m and was costing R360m, while Orion, with a monthly revenue of R75m, cost R380m about a year ago.
“It’s paying top dollar without a doubt,” he said. His company had held discussions about buying Storm, he said.
“We’d have loved it. It’s a quality business run by capable individuals but I couldn’t come to terms with the valuation.
“I’d have paid about R130m. You have to run your own calculations and determine what it’s worth it.”
Vox was paying about R60000 for each of Storm’s customers, which was far above the cost of acquiring new customers through organic growth, he said.
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