By: Dylan Sikes - AllPennyStocks.com News

Friday, February 21, 2014

In the competitive communications industry, companies need to be diversified in their offerings to try and capture as much market share as possible. Telehop Communications began two decades ago as a regional telecom providing residential and business two-way monthly flat rate calling services only in the Greater Toronto market. Over the years, the company has remained headquartered in Toronto, but expanded its reach to become one of Canada’s largest alternative telecommunications providers with a long list of business and residential customers. Telehop (TSX-Venture:HOP) still has its grass roots offerings allowing customers the ability to make calls globally at a substantial discount, but has expanded its portfolio with private voice networks, business phone networks, SIP, Internet services and more.

In 2012, Telehop acquired the business services division of G3 Telecom Corporation as part of its investment in a new switch and network infrastructure to support expansion objectives. G3 Telecom, along with its group of companies, is a facilities-based reseller of telecommunication services with networks canvassing the United States and Canada.

In December, Telehop said that it had penned a letter of intent to acquire the remaining portion of G3 Telecom. As investors know, though, a LOI is only as good as the definitive agreement that follows it. Plenty of companies sign LOI or memorandum of understanding that never materialize into anything.

Telehop has followed through on its commitment with a definitive purchase agreement announced on Friday to acquire all the shares and assets of G3 Telecom and the companies under its umbrella. This not only expands Telehop’s phone business, but launches the company into the wireless services industry.

Per the deal, Telehop paid $4.3 million for G3 and its assets. The amount will be paid through $2.0 million in cash, $1.5 million over the next two years via a secured promissory note bearing 5 percent annual interest and the issuance of 8 million shares of HOP. The amount of the promissory note will be reduced by $1 million if Industry Canada doesn’t approve transfer consents of two wireless spectrum licenses to Telecom’s control within 90 days of the closing of the acquisition. 5 million shares will not be given to G3 if the U.S. Federal Communications Commission doesn’t approve the transfer consents of G3 Telecom’s U.S. subsidiary to Telehop’s control in the period of time. Even though those stipulations are part of the contract, Telehop said that it doesn’t foresee any problems with the transfers.

Telehop gets G3’s telecommunications businesses in the U.S. and Philippines, as well as wireless telecommunications licenses for Huntsville, Dawson Creek, British Columbia and Ontario.

Telehop becomes significantly more formidable with the acquisition, which will have investors looking more closely at their growing revenue and profitability. During the nine months ended September 30, 2013, Telehop swung to a profit of $133,774 from a loss of $39,729 in the year prior period. Revenue rose in the third quarter compared to Q3 in 2012, although over the none-month period, revenues were down versus a year earlier.

Point being, that the company didn’t have to spend too much cash to make the acquisition of G3 Telecom. Making the smaller acquisition in 2012 of the G3 division seems to be boosting the bottom line; so perhaps absorbing the rest of the company will deliver similar results going forward. Investors seem to like the news, with shares climbing 27.8 percent to 11.5 cents in Friday trading.

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