M2 snaps up Primus Telecom Australia

M2 Telecommunications has bought the customers and network assets of Primus Telecom Australia for $192.4 million.

The surprise acquisition covers 165,000 retail and wholesale contracts, the Primus and iPrimus brands and about 500 staff in Australia.

M2 will also take on physical assets including Primus Telecom's national DSLAM and MPLS network, data centres and metro fibre rings.

M2 said it would use some of those assets "to sell and support next generation cloud-based services".

The telco said Primus had 2508 square metres of data centre space, expandable to 4273 square metres.

The CBD data centre facilities are in Sydney's Pitt Street and Melbourne's King Street and Flinders Lane.

M2 also said that the increased scale it would gain through Primus would strengthen its position in an NBN world.

The acquisition is all cash. M2 said it would launch a one-for-four renounceable entitlement offer to its shareholders in a bid to raise about $83.1 million, which it would use to refinance existing debts.

It had also secured a new three-year, $182.5 million senior bank facility.

The company said it expected "synergy benefits" of at least $5 million a year would make a positive impact to earnings for the 2013 financial year.

M2 is home to brands including Commander and Southern Cross Telco. M2 also has a wholesale division that deals in fixed line, mobile and data telco services.

It is the first time the company has branched into purely residential and corporate offerings, however. As part of the acquisition these markets would be covered by two new business units - iPrimus for residential services, and Primus Telecom for corporate managed services.

Primus Australia had started to invest "millions" in business fibre network upgrades and to ramp up its marketing efforts under new chief executive Tom Mazerski.

The telco had hoped to renew focus on its customers in the wake of the local CEO change in the middle of last year. Long-time CEO Ravi Bhatia retired, making way for Mazerski.

Primus was also vocal on regulatory concerns over the operation of the National Broadband Network.