M2 Telecommunications Group
Smart50 rank: 15
Revenue: $100 million
Growth: 79.56%
Founders: Vaughan Bowen, 35
Based: Victoria
Employees: 170
Industry: Communications
Website:
www.m2.com.au
M2 was born out of a small technology manufacturing company that produced voice message systems. It now has $100 million revenue compared to $43 million in 2006-07. The company has 170 employees.
Vaughan Bowen bought the Adelaide equipment retailer in 1999 and quickly identified the need for the company to expand into providing telecommunications services that generated recurring revenues. “With the acquisition of a small telecommunications services provider in 2001, M2 set about supplying business customers with telephone calls in addition to the equipment,” Bowen says.
He was competing head-to-head with the giant telcos that had established sales channels, so M2 had to create its own sales channels. As it was seeded with little capital, the company realised it had to create an incentive to bring more customers on board, and to keep the existing customers. Its Phone & Fly program offered 15% of the customer’s monthly invoiced spend back in the form of real cash for travel, and it now has many thousands of members.
M2 is the first telco reseller to wholesale all services to junior and other reseller telcos, placing it in the company of Telstra and Optus. M2 is in the nimble position of being able to service small or junior telcos that the larger firms find too difficult to reach. M2 is offering not only a high level of support, but also the ability to access all services from the one provider.
Reseller competitors were finding it hard to be profitable, so Bowen saw an opportunity to expand the company’s customer base beyond small enterprise and individual customers, to small and medium sized telcos, while increasing both top and bottom lines.
In early 2006, M2 approached Optus, with the key idea of aggregating wholesale mobile services to other telcos, including those that would normally be too small for Optus to pursue, and won the contract. M2 now provides wholesale services to approximately 20 companies in the telco sector.
Following on from the opportunity of becoming an aggregator for Optus mobile services, Bowen set about allowing junior telcos to purchase all network independent services in one place. The result, less than a year later, was “M2 Wholesale,” a wholly rounded wholesale division capable of supplying 3G mobile, wireless broadband, ADSL2+, local access resale, and fixed line voice services.
Financially, for first half 2008 results, taking the company to the next level resulted in an increase in wholesale division revenues to more than $17 million, growing 514% on the previous corresponding period, and an increase in wholesale division net profit after tax to almost $1 million, growing 1975% on the previous corresponding period.
M2 completed four major acquisitions from May 2007 to February 2008, which were targeted not only to be earnings accretive, but to build upon the internal structure of the business.
Plans going forward include expanding M2’s small enterprise product suite and third party sales channels in both Australia and New Zealand and launching the first New Zealand Mobile Virtual Network Operator (reseller) of Vodafone mobiles.
“At this level, it becomes a temptation to acquire companies as a means of acquiring customers, but M2 is restricting itself to acquisitions that are not only financially beneficial, but that provide either managerial or technical benefit to the company,” Bowen says.
