Is It Worth? Debt 1Billion and MC 1.4Billion, page-4

$1b debt is a bucket load of debt. The earnings of $400m is ok, but being an infrastructure company, Vocus needs to continually plough money into capex, just to cover replacement costs. Thats why I focus on debt to asset ratio. $400m earnings does not provide a lot of wiggle room to repay debt and maintain the assets, let alone expand them.

Thats why getting the debt down is so important because servicing costs will be lower and earnings greater, leaving more money available for infrastructure expansion and hence future earnings sustainability.

Debt should be at least half of what it is to enable Vocus to grow and our SP to get anywhere near where it was.
Also, a debt that size, tends to consume management as well. Apart from anything else, trying 5to secure rollovers at a reasonable price. It may seem easy on the outside but within the company, the debt issue will be churning. All their internal forecasts, and there will be a lot of regular ones, will be about how to allocate the cashflow towards capex, operational, new opportunities (small'ish) and debt repayment. I can assure everyone that this item will be occupying a significant amount of time.
Oh, it also sounds like they need to spend a significant sum of money on internal technology solutions. This could be around $50-100m (guess) given the disparate businesses and especially at the retail level. Just on that, having worked at the NBn for a while, the single biggest problem that customers are facing mainly relates to the ISP's not spending the mega millions required to handle the extra volume coming through the pipe. It seemed like a cartel with the ISP's in that they could blame the NBN, but most of the issue was and is with the ISP's. They didn't spend the $ to be able to handle the extra volume of data. Not sure where Vocus sits with this but I would think, not wonderful.
If debt was smaller, then management could focus purely on growth.
Debt is like a noose. And I'm not sure that TPM isn't going through similar exercises. It's just their marketing is better than Vocus, at the retail level anyway. But let's see how they do at year end after significant discounting.