JSE-listed technology and telecommunications group Reunert paid R171,9m for privately held ECN Telecommunications, its 2011 financial results show. Of this, R107,8m was in the form of goodwill, which means Reunert attached a fair market value to ECN of R64,1m.
Reunert says the goodwill arising from the acquisition “consists largely of the synergies expected from enhancing the group’s ability to provide fully converged communications solutions”.
The group acquired ECN, which has been folded into its Nashua business, to grow its presence in the voice-over-Internet Protocol or VoIP market. Like rival Altech Autopage Cellular, Nashua Mobile, Reunert’s biggest subsidiary is exposed to the least-cost routing (LCR) market.
LCR players are under pressure as call termination rates — the fees mobile operators charge one another and other industry players to carry calls onto their networks — come down, reducing arbitrage opportunities.
It says the ECN acquisition has allowed it to “retain the margin related to its LCR base” and provided it with a network that allows it to provide its own voice and data solutions.
Reunert’s results, for the year ended 30 September 2011, show that ECN generated a profit of R2,8m on revenues of R397,4m. Since the acquisition became effective, it has made a loss of R600 000.
Nashua Mobile enjoyed what Reunert describes as a “satisfactory year”, with 27 000 additional net connections.
Group revenues rose by 2% to R10,9bn while operating profit was up 10% to R1,4bn. — Duncan McLeod, TechCentral
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