Infratil could have competition in its bid to buy Vodafone's New Zealand operations.
Three private equity giants - all US-based - are said to be eyeing Vodafone NZ: Blackstone, Kohlberg Kravis Roberts (KKR) and TPG Capital (not to be confused with Australian company TPG Telecom, which is attempting to merge with Vodafone Australia), with two bids placed.
Infratil shares were put in a trading halt on Friday after it filed that it was in talks with Vodafone. Canadian investment giant Brookfield is reportedly Infratil's partner in the deal, which is said to value Vodafone NZ at $2.65 billion.
The halt is still in place this morning. Infratil says it will be lifted when it has news on its possible transaction or before market open on Tuesday - whichever comes first.
While Intratil and Vodafone are said to be in "late-stage" talks, The Australian reports two global buyout funds with experience in telecoms have come forward with higher offers for the Vodafone subsidiary.
TPG Capital and KKR have been lurking with intent around the NZ telco scene for some time.
The pair were reportedly the private equity players in the frame when ASX-listed Vocus (owner of Orcon and Slingshot) but its NZ assets on the block in 2017. It was said the pair wanted to partner in a two-stage deal that would see them buy 2degrees, then 2degrees buy Vocus NZ. However, a price could not be agreed for 2degrees, and Vocus NZ was withdrawn from sale in early 2018.
The sprawling Blackstone has held stakes in numerous NZX-listed companies. Market scuttlebutt holds that it is trying to offload its Burger King NZ franchise.
Meanwhile, one analyst has told the Herald that if it goes ahead, and Infratil-Vodafone deal could see some assets offloaded and listed on the NZX as per the Z Energy listing in the wake of Infratil's acquisition of a 50 per cent stake in Shell NZ.
For 2017 (its most recently reported financial year), Vodafone NZ made a profit of $57.5 million, turning around a loss of $18.3m. Revenue increased 2.8 per cent to $2.05b.
In the mobile market, it has around 2.4m mobile customers, putting it neck-and-neck with Spark and well-ahead of third-placed 2degrees.
In fixed-line broadband, Vodafone NZ has around 430,000 customers, putting it second behind Spark (around 670,000) and well ahead of third-placed Vocus (around 200,000).
Vodafone chief executive Jason Paris has set about making the telco a more attractive proposition, by taking an axe to costs, then seeking new digital opportunities.
In February Paris told the Herald that as a proud Kiwi, he would like to see his company listed on the NZX but said the decision could well be made higher up Vodafone's global foodchain.
Asked then if the company was being positioned as a growth or value stock he said:
"I'd like to think both, right? It's good to have your cake and eat it, too. But the reality is we're in a very competitive industry where low single-digit revenue and margin growth is the norm. So a yield and dividend stock is where we'll be positioned initially."
Good fit for Infratil
Buying into Vodafone would not be Infratil's first tech investment.
In 2016 it bought a half share in Canberra Data Centres (CDC) for A$392m and a year later invested a further A$50m to help fund its growth.
Last month Infratil said the value of its 48 per cent stake in CDC had risen from $487.8 million to $841-$942m.
And when Vocus put its NZ assets (Orcon, Slingshot) on the block, Infratil was one of the rumoured bidders. The Vocus board eventually ended the process without a buyer.
Fat Prophets' Greg Smith noted that Infratil chief executive Marko Bogoievski was one of Theresa Gattung's top lieutenants at Telecom before he left in 2007, so has experience in the telco market.
"Vodafone is a good cashflow generator, it fits well with Infratil and makes a bit of sense … even though there is competition, it does have a dominant position, is number one in mobile and two in broadband.
"And it's not like there's going to be a whole host of new disrupters coming into our market."