Telegroup Agrees to Acquire Switch Telecommunications Pty. Ltd. and Frame
Relay Pty. Ltd., Enhancing Australian Presence
FAIRFIELD, Iowa (Aug. 6, 1998) --Telegroup, Inc. (Nasdaq:TGRP - news)
today announced that it has agreed to acquire all of the stock of Switch
Telecommunications Pty. Ltd. and all of the assets of Switch's affiliate, Frame Relay Pty.
Ltd., both of Sydney, Australia, for a combined purchase price of AUD $36 million
(approximately USD $22 million). The transaction is expected to close August 7,
1998.
``This acquisition is a major step in our strategy to become the fourth largest telecom
provider in Australia,'' stated Eric Stakland, Telegroup's Senior Vice President of Global
Retail Businesses and Services. ``Switch and Frame Relay complement our existing voice and
data businesses in the Australian corporate customer market. The addition of Switch's
direct sales force will greatly strengthen our distribution to middle market Australian
companies.''
Tom Brand, Telegroup's Chief Technology Officer, commented: ``As we outlined at our Annual
Shareholders' Meeting, Telegroup is looking for regional data providers to complement our
global backbone multi-service network. Frame Relay, although a relatively new player in
the Australian data market, has quickly assembled an impressive data network throughout
Australia and the Pacific Rim. This acquisition will enable Telegroup to offer national as
well as cross-border frame relay services to corporate customers in Australia. We expect
the corporate data services market to grow rapidly in Australia and New Zealand, and the
acquisition of Frame Relay, coupled with our existing Newsnet subsidiary, positions
Telegroup to be a strong contender in this field.``
Switch Telecommunications is a full service telecommunications provider
serving medium-sized businesses throughout Australia. Switch provides a broad range of
voice and data telecommunications products and services, including national and
international long distance, calling cards, call center, internet access, frame relay and
broadband services. Switch distributes its services through a 38-person direct sales force
and through a network of value-added resellers. Switch offers unified ``one-bill''
invoicing to its customer base and provides 7X24 customer service. Switch was established
in 1994 to take advantage of the deregulating Australian telecommunications market.
Switch Telecommunications and Frame Relay maintain an extensive voice and
data network throughout Australia which includes six Lucent Definity voice switches and 46
Motorola and Newbridge frame relay data points of presence (PoPs). This network comprises
one of the largest frame relay networks in Australia. In addition, Frame Relay
participates in the cross-border data market through six internationally located PoPs.
John Lass, Telegroup's Senior Vice President of Strategy and Business Development,
concluded: ``Strategically, the acquisitions of Switch Telecommunications and Frame Relay
are ideal fits with Telegroup's overall mission to provide integrated voice and data
services to retail and wholesale customers over a global multi-service network and with
our objective of expanding market share in Australia. Over the past year Telegroup has
already acquired Australia-based companies including Newsnet Pty. Ltd., an enhanced fax
provider, and RediCall Pty. Ltd., a co-branded calling card provider. In addition,
Telegroup has invested in significant fiber-optic capacity on the Southern Cross cable
system and intends to add capacity on the APCN cable system later this year.''
Telegroup is a leading global provider of national and international long distance
telecommunications services, serving residential and small and medium-sized business
customers in more than 200 countries worldwide. The company also provides value-added
wholesale services to over 40 domestic and international telecommunications carriers.
Telegroup operates a global, digital, facilities-based network, the Telegroup Intelligent
Global Network(R), which consists of 25 Nortel DMS 250/300 and Excel LNX voice switches in
12 countries, 23 Nortel Passport ATM switches, 6 enhanced services platforms, 26,000 miles
of owned IRU and leased IPL capacity on digital fiber-optic cable links, and leased
parallel data transmission capacity.
Telegroup had revenues of $337 million in 1997.
Application of the Safe Harbor of the Private Securities Litigation Reform Act of 1955:
This news release contains statements which are not historical facts and may be considered
forward-looking statements, within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of 1934, including expansion of
Telegroup's network, improvement of Telegroup's competitive position in Australia and
globally, and achievement of Telegroup's business plan.
Telegroup's actual results may differ materially due to numerous factors including,
without limitation, the Company's success in developing its business plan, and acquiring
additional financing needed to meet this plan, foreign currency fluctuations, termination
of certain operating agreements, and changes in tax law. Those and other risks are
described in the Company's filings with the Securities and Exchange Commission.
This press release contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including statements regarding the Company's ability to seize
opportunities from continuing deregulation of the telecommunications markets, the number
of switches/nodes, circuits and facilities the Company plans to install, the anticipated
expansion of regional carrier sales, the anticipated expansion of the Company's direct
dial service, the ability to migrate customers from Global Access CallBack to Global
Access Direct, the increase in the Company's internal and external sales forces, and the
achievement of the Company's business plan. The Company's revenues and ability to continue
its expansion are difficult to forecast and could differ materially from those projected
in the forward-looking statements as a result of numerous factors, including without
limitation, operating and technical problems, regulatory uncertainties, possible delays in
the full implementation of liberalization initiatives, competition, availability of
capital, foreign currency fluctuations, and changes in the US and foreign tax laws.
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