MediaRing seems to have gone crazy with little acquisitions, in the same week that its big deal to take over Pacific Internet fell flat. Like a heart-broken lover out to show the world that they’ve moved on and are seeing other people, MediaRing is seemingly trying to show that it didn’t need Pacific Internet after all. You can’t help but think that CEO Khaw Kheng Joo is on the rebound. I just hope for MediaRing’s sake that he doesn’t make the same mistakes jaded lovers often do, and get into bed with the wrong people. Figuratively speaking, of course.
Let’s consider the facts.
MediaRing’s bid for Pacific Internet failed Monday evening New York time, after only 29% of PacNet shares were tendered. MediaRing had made it a condition of its bid that it gets 50%. Even with the 4.8% of PacNet they already owned, they fell way short of that target.
“We are disappointed that we did not receive more tenders from PacNet shareholders for our offer, which we still believe offered exceptional value in an uncertain market,” Khaw was quoted in his press release.
I agree with him. It made a lot of sense for MediaRing and PacNet to join forces, and I also feel for shareholders who publicly called on PacNet to explain their strategy more to allow shareholders to make an informed decision on whether to accept the bid.
But here’s the interesting part in Khaw’s press statement: “We will continue to actively evaluate a variety of M&A opportunities to further expand our business and build value for MediaRing shareholders.”
Well, he wasn’t just actively evaluating a variety of M&A opportunities. He was already ready to pounce!
On Wednesday, he announced the acquisition of Singapore Internet Service Provider NetPlus Communications (has anyone ever heard of them?!?!). According to MediaRing, NetPlus’ revenues totalled US$950,000 and the company has a net worth of US$850,000. Yet MediaRing paid S$9.5 mln for them. How is that “building value for MediaRing shareholders”?!
The fact that the acquisition came so shortly after the PacNet failure begs the question: would they still have bought NetPlus if their acquisition of PacNet had succeeded?
If yes, what does NetPlus have that PacNet doesn’t?
If not, this is clearly going for second-best.
Then today came the announcement of more acquisitions, again phrased as if to say to PacNet directors, “we don’t need you”.
Look at the way the press release is worded: “Following its recent S$9.5 million acquisition of a Singapore Internet Service Provider (“ISP”), NetPlus Communications Pte Ltd, mainboard-listed MediaRing Limited (“MediaRing” or the “Group”) is rolling out its next phase of strategic investments – this time in Africa.
It’s buying a 40% stake in a joint venture with a strategic partner of Global Telecom Group. So, not Global Telecom, but just a partner of Global Telecom. This JV is going to buy an existing voice carrier in Angola. The name of that carrier wasn’t given.
MediaRing wants to expand VoIP services in a continent that’s not exactly saturated with landlines, let alone internet connections, let alone the broadband internet connections need to make VoIP competitive with plain old IDD services.
MediaRing is also going to buy a 40% stake in Vipafone Proprietary Ltd, a company owned by Global Telecom.
It didn’t say what these stakes are actually worth, but at least with a price tag of US$1.5 mln there is less room to overpay than with its S$9.5 mln acquisition of NetPlus.
MediaRing quotes numbers by Gartner Dataquest from August last year which said the total retail telecommunications services for South Africa and the rest of Middle East and Africa was estimated at US$80.9 billion in 2005. Of this, South Africa alone contributed US$9.3 billion.
A break-out for Angola was, regrettably, omitted.
We have tried to interview MediaRing in the past but were turned down, and while I haven’t sought comment from them for this blog, the onus is on the company to explain all this a little further.
There may be good reason to be making all these little itty-bitty acquisitions, seeing that the big fish got away. But I can’t see it. And telling me in meaningless PR speak that “our goal is to become a significant global telecommunications provider and MediaRing is moving strongly ahead with our dual approach of organic growth and strategic M&A to achieve that goal. At the end of the day, we hope to deliver maximum value to our shareholders” wouldn’t make me sleep easier at night, if I was a shareholder of MediaRing.
I wonder what acquisition they’re going to announce on Monday. A takeover of Iceland’s ninth largest telecoms company?