Optus buys Virgin Mobile

Optus' purchase of Virgin Mobile Australia is too small to affect the company's rumoured interest in Telecom's AAPT subsidiary but it does signal the beginning of industry consolidation in Australia, analysts say.

Optus, owned by Singapore Telecommunications and the second-largest telco in Australia after Telstra, has acquired the 74 per cent of Virgin Mobile it did not already own from Virgin Group. The deal involved a cash payment of A$30 million ($32.5 million) and an estimated A$70 million in licensing fees. Optus will also take on A$1.3 million in outstanding debt owed to Virgin Group.

"We look at opportunities as they arise and will continue to do so," said Optus spokeswoman Melissa Favero.

A Telecom spokesman had no comment on the potential acquisition.

The deal was not seen as a major one by analysts, given Singapore Telecommunications' deep pockets.

"It's a small acquisition. Given Singtel's balance sheet, it's not an overly cumbersome change to their debt structure at all," said an Australian analyst, who asked not to be named.

ABN Amro analyst David Boyce said the deal was immaterial for a company the size of Singtel.

"The most interesting part is that the consolidation of the Australian mobile market is beginning."

Telecom said late last year that it would review the underperforming AAPT and would hold formal discussions with interested parties about partnering or selling the unit.

Industry watchers have pegged Optus as the likeliest buyer of AAPT. A bid by Optus to buy AAPT in 1999 was blocked by the Australian anti-monopolies authority.

Favero said the company continued to have no comment on a possible deal for AAPT but added that the Virgin Mobile pickup would not affect Optus' position on making future acquisitions.