VOD is looking to de leverage and raise cash as it is buying European assets from Liberty Global. On first look this looks like a good investment with downside protection and possibility of value creation. I suspect this will be either an investment for BBU or BIP. We will have to see how this does in next 5 years.
Reasons for Liking Deal:
1. VOD NZ has 41% mobile market share (#1 player) and 26% Broadband market share (#2 player). This is a small market as population of NZ is 4.8M so other than these 2 top player VOD NZ and Spark no more competitors will emerge.
2. NZDUSD is at 0.65 which is a 5 year low. Feb 2009 was 0.52 which recovered to 0.72 by Jun 2009. Good entry point from Forex perspective. High for NZD was $0.85 I. 2011-2014 years.
3. Brookfield is partnering with Infratil a local company which has infrastructure assets. Also Brookfield owner the Electricity Provider and Gas Pipeline in NZ which they bought in 2009 during the crisis from Babcock and Brown Infrastructure which they sold few years later. So they are familiar with the market.
4. VOD has 700 million subscribers world wide and NZ with 2 million subscribers is non core to them and they are a motivated seller as they try to de leverage. So I suspect price is a good one for the buyer.
5. Dense Market as NZ population is mostly in 2 islands and major cities Auckland and Christchurch so maintaining network will be easier than in large countries like Canada for instance.
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