Boku - Consolidating the carrier billing market

Boku has announced plans to acquire Fortumo, a direct carrier billing (DCB) competitor, for an enterprise value of $41m. While not large in volume terms, Fortumo’s focus on smaller merchants attracts higher take rates and, combined with its low-cost Estonian operations, results in a highly profitable business. The acquisition is being funded by the recent equity raise (23.6m shares at 85p) and new debt. We estimate that the deal is immediately earnings enhancing, and strengthens Boku’s already dominant position in the DCB market. While no cost or revenue synergies are currently factored in, in the medium term there is potential for Boku to take advantage of Fortumo’s lower cost base, and for Fortumo to benefit from Boku’s carrier relationships and scale.