Boost Mobile to Take on Amazon: Founder Prepares for Bidding War

Boost Mobile to Take on Amazon: Founder Prepares for Bidding War

Boost Mobile Takes on Amazon

Founder Prepares for Bidding War

Boost Mobile is a wireless telecommunications brand with companies in both Australia and USA. It was founded in 2000 by Peter Adderton who is currently the largest shareholder in the company. Since its opening, Boost branded services were provided by the Optus network, up until 2012 where Optus decided to end its business with boost. In retaliation, Boost entered into a deal with Telstra as Boost began to offer products under the brand of ‘MVNO’ hosted on the Telstra Next G Network.   

After founding the company in Australia and New Zealand in 2000, Adderton and Kirk McMaster brought the mobile brand in the United States in 2001 as a joint venture with Nextel Communications. At the time, Boost mobile offered an unlimited push-to-talk service using Nextel’s iDEN network, only costing customers a dollar a day. Nextel communications acquired Sprint Communications in 2006, who began to offer a new unlimited service using Sprint’s CDMA network, offering unlimited calls, texts and internet data.

Boost mobile regularly sponsors sport teams and sporting events. Some sponsorships include: RockCorps, the WNBA, and the surfing event ASP World Tour. As of 2019, Boost is the naming rights sponsor of Garry Rogers Motorsport in the Australian Supercars championship.

Adderton sold the U.S business to Sprint in 2004 but now believes he can take back control in a move that would be beneficial to the Australian business. This will be difficult now as Sprint is planning to sell boost as part of a merger with telecommunications giant T-Mobile. Adderton said Amazon, Facebook and Mexican multi-millionaire Carlos Slim are possible buyers of Boost USA.  This has now turned into a bidding war, with Adderton confident that he can raise the necessary capital through private equity.

Adderton’s vision to merge Boost Australia and USA

Mergers and acquisitions is a term that refers to the alliance of companies or assets through various financial transactions. In a merger, the board of directors of the two companies will approve the combination and seek shareholder’s approval. Sprint’s merger with T-Mobile is a deal that can be compared to Vodafone’s merger with TPG as both would see third and fourth largest players in the mobile network operation running a business together. Adderton believes that buying back Boost USA will cost “a few billion” but is not worried about raising capital as he has a shrewd experience raising capital in the USA (raised $US1 billion for other companies in America). If successful, Adderton would take Boost USA and combine his Australia in a merger and take the company to an initial public offering.

Adderton’s Australian business is a mobile virtual network operator (MVNO), which in Boost’s case is Telstra. Statistics show that his Australian business is very small compared to other companies in the mobile sector. IBISWorld, who do market research and analysis estimated a total revenue for the MVNO market as $749.8 million. Telstra, Optus and Vodafone continue to dominate in the Australian mobile retail market.

With the backing of a big international brand, Adderton will be pushing for major changes in the Australian market- including regulating the currently unregulated MVNO market.

Vodafone-TPG Mega Merger

The Australian Competition and Consumer Commission (ACCC) blocked the $15 million merger earlier in the month as they expressed concerns for competition if the deal was to go through. With Vodafone’s high end network and TPG’s low prices, the consumer watchdog believes that consumers will be left with limited choices for purchases of mobile phones, land line and internet deals. A merger like this can have many negative consequences to Adderton’s plans and ultimately his company. Adderton strongly supports the ACCC’s decision and boasts Boost’s aggressively competitive prices and its strong relationship with Telstra. Industry experts however believe the telco companies stand a good chance at reversing the ACCC’s decision.

Adderton trusts that consumers would win big time if the three network operators were required to allocate 30 per cent of their traffic to MVNO’s as under the current rule, the operators are under no obligation to give MVNO’s any access to their networks. This would eventually cause a big downfall for Boost products.

Future of prepaid and MVNO’s, unknown

According to analysis in a Wall Street research firm, prepaid sales across the US has significantly decreased since 2015 however if the T-Mobile and Sprint is enacted, it will be selling the nation’s second largest MVNO. The companies have promised that whoever buys boost will get access to the new T-Mobile network.  Sprint and T-Mobile will aim to finalise the sale within three months after closing their merger.

Peter Adderton seems best set for taking back his Boost USA business, backed by several investors to fund a bid. Adderton will definitely be able to leverage his understanding in managing Boost in Australia to create a demand in the US market.

By Rizwan Sayeed

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