Companies and private equity buyers now have access to the lowest cost of debt in a generation, and can easily afford to make acquisitions with leveraged finance.

It makes sense to go for an acquisition as long as the acquired business can generate enough cash flow to pay off debt, Credit Suisse analyst Hasan Tevfik has said in a recent investment update.

No wonder there was the air of M & A hanging over the sector, given that small telcos had very strong cash flow and relatively clean balance sheets, Mr Tevfik said.

Vocus and Amcom entered a due diligence process last month regarding a potential transaction, after Vocus bought a 10 per cent stake in Amcom earlier.

What could turn the scene more complex is that, nearly at the same time, TPG Telecom increased its stake in Amcom to 6.7 per cent. TPG could possibly block the Vocus-Amcom deal if it lifts its holding to 10 per cent.

TPG could also chase internet service provider (ISP) iiNet, in which TPG already owns a 6.3 per cent stake.

Another banking source suggests that a merger between Vodafone, Hutchison and iiNet will make great sense as the businesses are “very complementary”.

There has been speculation that Vodafone will exit Australia as it moves to focus on growth markets. That could leave its joint venture partner Hutchison Telecommunications — controlled by Hong Kong billionaire Li Ka-Shing — to buy the stake or find another buyer for part of the business.

iiNet itself is also likely to acquire some small ISPs to achieve bigger scale, after buying a 60 per cent stake in Tech2 group in September.

The company, which has grown through a series of acquisitions, has openly said it would acquire at the right price. It also considered merger with M2 Group two years ago to create a new force in the broadband market, according to earlier reports.

Another mobile service provider Amaysim, backed by German investment company Shark Holdings, is still mulling its options to either proceed with an IPO or a trade sale.