Taking on the wireless world - Jump Capital and Wilson Neill
By Frank Fernandez
In June this year, a telecommunications and technology investment company called Jump Capital announced it was teaming up with mobile phone seller Ericsson. Jump Capital said it was actively looking at entering the mobile market in New Zealand and was to bid for 3G spectrum - which enabled high-speed transmission of data over mobile networks. Jump Capital said it was doing this because the spectrum auction was the gateway to the development of three big areas in telephony - broadband, mobility and internet.
Sir Michael Fay and David Richwhite.
Under normal circumstances, there would probably have been only cursory interest in the announcement except for the fact that some prominent business 'heavyweights' were behind Jump Capital...namely
- Fay Richwhite Holding (Sir Michael Fay and David Richwhite)
- Todd Capital
- Oceania and Eastern (the investment company of prominent New Zealand businessmen Robin Congreve, Geoff Ricketts and Chris Mace).
With offices in Auckland and Sydney, Jump Capital is understood to have set aside an initial NZ$140 million for investment purposes although "there is more if needed". And looking at the principals behind the company, there is no reason to doubt this!
Jump Capital has been in the forefront of market discussions in recent weeks that it is to take a cornerstone holding in hospitality-cum-wireless technology company, Wilson Neill which trades on the unlisted market under the ticker code WNC. Jump Capital is understood to have completed due diligence of Wilson Neill subsidiary, Radionet with the aim of using it, with the backing of Ericsson, as a vehicle to roll out an Australasian cellular network.
While no official announcement has yet emanated from the two companies concerned, it however came as no surprise to some in the marketplace last week when CEO Paul Hyslop of Wilson Neill publicly indicated that
- Jump Capital was to take an initial 20% (NZ$30 million) cornerstone stakeholding in Wilson Neill
- Wilson Neill would divest its hospitality business in due course in deference to the wishes of Jump Capital directors who wanted the future Wilson Neill entity to focus solely on wireless technology
- The future Wilson Neill entity would list solely on the Australian Stock Exchange.
In addition, the normally reticent Mr Hyslop indicated that final legal details were being worked out on a reverse takeover deal with former Australian mining company, Mt Conqueror. Wilson Neill would obtain 76% ownership of Mt Conqueror which was to change its name to Radionet. The deal would pump an instant NZ$26 million into the coffers of Wilson Neill - as well as expose Radionet to the Australian marketplace in pretty smart time.
Wilson Neill currently operates the chain of 23 Cobb & Co restaurants around the country as well as Iguacu restaurant in Parnell, Auckland. The divestment of its hospitality business, which brings in revenues of $6 million annually, will either see a straight sell-off or the business being floated off into another entity with shares issued to existing Wilson Neill shareholders. While this will be an added bonus for shareholders, Radionet is the main investment attraction of Wilson Neill - being the wireless internet arm of the company.
Radionet uses spread spectrum radio frequency in the 2.4GHz range to send and receive data at speeds of up to 11Mbps. Based on the amount of bandwidth being used, Radionet's 100%-owned subsidiary Onthenet is one of the top five largest Internet Service Providers in New Zealand. In layperson terms, Radionet's quality and speed provide images and information 20 times faster than Telecom's top-of-the-line product, Jetstream.
In April this year, Wilson Neill formed a joint venture alliance with telecommunications giant Siemens to enable voice traffic to be carried over the Radionet wireless data network. The Siemens' voice-over-the-net technology allows businesses to make phone, intranet or extranet calls to other offices in their organisations in the normal way but instead of connecting through Telecom land-lines, they will be connected to the Internet through Onthenet and carried over Radionet's wireless network.
It is therefore little wonder that Australian equities buyers recently scooped up 10 million Wilson Neill shares after being impressed by Radionet's technology and scope for growth. It is also little wonder that Jump Capital, one of the bidders in the ongoing New Zealand radio spectrum auction, would be similarly interested.
For Wilson Neill investors however, the news that Jump Capital will be a prominent partner and player in the future direction of WNC must be just reward for sticking with a company that has seen its fair share of detractors in recent years. However, to be fair to WNC, operating in the Unlisted Market does not compel it to adopt compliance practices commonly practised by companies trading on the main board. No strict disclosure or market surveillance regimes operate on the unlisted market which invariably create a more lax trading environment.
But WNC investors need not fear that such laxity will prevail in the future, it seems! The directors of Jump Capital have already started flexing their muscles where Wilson Neill's future direction is concerned - the divestment of WNC's hospitality businesses and the sole ASX listing requirement are the first signs of Jump Capital's management pull. Listing on the ASX is also a more costly process than listing on the NZSE, and the decision to do so would not have been taken lightly. Providing greater security to investors would be the market framework in which companies operate on the ASX - which is more defined and regulated. There will be no room for any laxity....but then a company cannot afford to be especially if you have the likes of Sir Michael Fay & Co breathing down your neck.
Wilson Neill would, in all probability, rebrand itself as Radionet before the end of the year as it expands in New Zealand, Australia and Asia. With the telecommunications market in Australia estimated to be worth around A$18 billion (of which about 40% to 45% relates to the transfer of data), a small percentage of that would leave Radionet very comfortable indeed. Plans in Australia are for Radionet to roll out its broadband wireless communications network in Sydney and then on to other cities.
That wireless technology looks set to be the next boom industry is inarguable and inescapable. Jump Capital has indicated that it intends to play a leading part in that industry. With its financial might behind Wilson Neill, investors could be in for a profitable ride.
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