M2 to buy Darwin telco EDirect

ASX-listed M2 Telecommunications has announced plans to purchase Darwin-based mobile services reseller EDirect for $5 million.

In a statement to the stock exchange today (pdf), M2 said it would acquire more than 50,000 post-paid mobile phone customers of EDirect’s mobile telco brand, VIPtel.

It also planned to acquire EDirect’s operating assets and systems, and would restructure EDirect operations to ensure a “sustainable and stable customer base”.

EDirect was currently facing its third Federal Court case against the Australian Competition and Consumer Commission (ACCC) for misleading conduct.

The ACCC on Monday accused EDirect of entering into mobile phone contracts with customers despite being unable to provide network coverage at their addresses.

It followed two separate ACCC lawsuits – one ongoing since last August, and another in February 2008 that saw EDirect forced to refund more than 150 customers, and pay $50,000 to the ACCC.

The acquisition was to be funded out of M2’s operating cash flow. Post-restructure, M2 expected the acquired assets to contribute $2 million to its Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) in the 2013 financial year.