July 2, 2019 / 11:29 PM / 5 months ago

UPDATE 2-Australia's Vocus splits ops into 3 units after suitors balk at entire firm

* Split likely to increase acquisition prospects -analyst

* Firm forecasts little growth in next two financial years

* Shares fall as much as 6% (Adds analyst comments, share movement)

By Aby Jose Koilparambil

July 3 (Reuters) - Vocus Group Ltd on Wednesday said it has split its operations into three independent units, a move one analyst said would likely attract prospective buyers after two suitors last month dropped bids to take over the entire company.

Australia’s fourth-largest internet provider, which said the change was aimed at simplifying its business, also forecast muted growth for the next two financial years, sending its shares down as much as 6%.

The split plan, announced at a strategy briefing, is part of a three-year turnaround plan initiated in response to an increasingly competitive telecommunications market.

It said its core Vocus Network Services had untapped growth potential, and that Vocus New Zealand - comprising a portion of the business it had previously tried to sell - was a “strong performer”.

Vocus Retail is struggling to grow in the legacy voice and broadband markets but is likely to return to profit by increasing revenue from mobile phone and energy offerings, the company said.

“We know that Vocus is undergoing a strategic review. This (split) may be the first step towards freeing up some of the better value businesses and divesting some as well,” said Michael McCarthy, chief market strategist at CMC Markets.

“It (the split) does increase the chances of acquisition activity in the space,” McCarthy said.

In June, electricity retailer AGL Energy Ltd withdrew its second takeover proposal, having conducted due diligence for a A$3.02 billion ($2.11 billion) offer. The same month, Swedish private equity firm EQT Infrastructure cancelled a A$3.3 billion bid.

Analysts had opined that AGL was more keen on Vocus’ retail business while EQT was interested in its undersea cable infrastructure.

In total, as many as four suitors have dropped bids over the past two years.

Also on Wednesday, Vocus reaffirmed its full-year forecast for underlying earnings before interest, tax, depreciation and amortisation (EBITDA) at A$350 million to A$370 million, and forecast the same range for the following year.

Earnings last year totalled A$366 million.

Over the past two years - during which time its chief executive resigned - Vocus issued several statements saying profit was unlikely to match forecasts, as customer numbers dwindled while profit margins shrunk.

To fight back, Vocus has been focusing on developing its fibre-optic infrastructure over traditional internet services.

($1 = 1.4312 Australian dollars)

Reporting by Aby Jose Koilparambil in Bengaluru; Editing by Richard Pullin and Christopher Cushing

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