EFTel predicts $2.2m annual wholesale windfall

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EFTel predicts $2.2m annual wholesale windfall

Favourable terms expected from proposed merger with ClubTelco.

ISP EFTel has revealed expected savings of up to $184,000 a month in wholesale costs if it succeeds in merging with ClubTelco.

The figure was revealed in the much-anticipated independent report [pdf] into the proposed deal by consultancy William Buck.

The proposed deal would see ClubTelco take a controlling 75 percent stake in EFTel in exchange for a multi-million dollar capital injection.

The independent report concluded that, subject to certain conditions being met, the proposed merger was "both fair and reasonable to non-associated shareholders of EFTel".

It also shone a light on the financial status of the two companies and, in particular, the "synergies" between the ISPs highlighted at the time of the proposed merger announcement last month.

It was already known that ClubTelco and EFTel shared the same wholesale DSL service provider, Dodo Wholesale, which was a Telstra reseller.

However, the independent report revealed the gap between the deals cut by the respective ISPs with Dodo Wholesale.

"We understand that the terms of the ClubTelco wholesale arrangements are significantly more favourable than the terms of the EFTel wholesale arrangements," the report noted.

The report said that if the merger progressed, Dodo Wholesale would likely bring its agreement with EFTel in line with "the prices paid by ClubTelco for equivalent services" and other contract terms.

EFTel estimated such a change could save it up to $184,000 a month - over $2.2 million a year - based on existing active service numbers, according to the report.

Another $15,000 a month in wholesale savings could also potentially be derived, the report said.

William Buck subtracted 10 percent from EFTel's calculations to build in the possibility that not all expected synergies would materialise.

The report appeared to confirm that there would not be any mass reduction in staff after a merger, although it noted there was likely to be some "duplication" in roles between the two firms.

EFTel's former chief John Lane was the first high-profile casualty of the proposed merger.

Further cost savings were expected by consolidating office space in Melbourne and cutting duplication of some administrative costs, such as audit and consultancy services.

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