Pacific Fibre boss rejects reports of 'failed funding', delays
Pacific Fibre chief executive Mark Rushworth rejects a report his company has failed to find funding.
This morning, the Australian Financial Review quoted un-named industry sources saying “the project is running behind schedule and may not be able to find the equity it needs to build the pipe.”
Founded by Rich Listers Sir Stephen Tindall, Sam Morgan and Rod Drury, Pacific Fibre is seeking to raise $US400 million to build a 12,950km fibre optic cable between Sydney, Auckland and LA – breaking the 50% Telecom-owned Southern Cross Cable’s monopoly as New Zealand’s only major broadband link to the outside world.
The company faces competition from a joint venture between Huawei Marine and Axin – backed by Chinese banks and telcos – which is planning a transtasman cable.
$170m in anchor customer contracts
Mr Rushworth said Pacific Fibre now had $170 million in anchor customer contracts - a total not previously revealed.
The total includes a $91 million commitment from government-owned broadband network operator Reannz, plus 10-year contracts with Vodafone NZ and iiNet (the largest independent ISP in Australia). Pacific Fibre has also secured a debt funding facility with ANZ. Up to 45% of the project could be funded by debt, Mr Rushworth has previously told NBR.
Meanwhile, Southern Cross Cable has cut its pricing, and added capacity - steps it says were always planned, not aimed at heading off competition.
The CEO said the cable would be fully financed “soon”, but would not give even a broad timeframe. “It will be funded when it gets funded,” Mr Rushworth said.
The AFR report was incorrect in saying Pacific Fibre would fail to get customers online next year.
The company had always aimed to go live in the first quarter of 2014, the CEO said (the date he has always given NBR in various interviews of the past couple of years).
The AFR was correct to say Pacific Fibre business development manager Mike Constable had departed.
Mr Constable left on March 9 to take a job in Singapore.
Mr Rushworth said this was because Pacific Fibre was moving beyond its initial focus on funding to hiring staff for the build phase of the cable.
Pacific Fibre is actively recruiting for three senior project management and engineering staff, who would world with build partner TE Subcom.
TE Subcom recently completed a “permitting study” of for the Pacific Fibre cable company and its planned landing points – a precursor to seeking resource consents.
“It will get financed and built,” Mr Rushworth said.
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Comments and questions12
Anyone who know anything about the international cable market knows that there is a global glut of capacity, prices are tanking, and there's simply no buisness case for Pacific Fibre. Pacific Fibre's doing a pretty good job of spinning myths and misinformation about the situation in NZ - but you can't spin a buisness case that doesn't exist.
[There may be a glut now, but in years to come fibre connections are going to dramatically expand demand for broadband capacity, which is already growing quickly.
Beyond that, two cables are better than one for price competition. CK]
Yiu don't need to build a new cable to increase connectivity CK. You've fallen for one of the myths that PF is spinning.
[Two players will hopefully generate price competition for said capacity. One does not - CK]
I don't think CK has fallen for the hype. Instead he will say anything is good if it is associated with Rod Drury or Sam Morgan.
There are five cables going into and out of Australia - including Southern Cross. That market is highly competitive. Those prices flow directly through to the NZ market. That's the way SC pricing works. It's a myth that SC is somehow maintaining "monopolistic" pricing. So, the position is pretty much the same as having five cables running directly into and out of NZ. You don't need another physical cable for price competition or any other reason. If you did, Pacific Fibre would be up and running by now. The fact that it is struggling says everything about the economics of the situation.
CK agree that for the consumer that competition provides a better answer. But Pacific Fibre are trying to secure investment capital, investors normally do not like competition and prices being driven down, undermines the reason to invest.
I suspect that is one of the major issues. So if you are saying that PF's business case is based on a price war then that is a really hard sell for investors.
Trex, you are very misguided. First of all, anyone who knows anything about cables will know that a new cable is not built due to lack of capacity - 3 drivers dictate a new cable build 1. Political reasons, 2. Where new technology offers a lower unit cost base 3. where a new market entry can break a duopoly. In a market where a monopoly prevails, price wars are in no ones interests. Bandwidth pricing from Aus to USA is > 20x that of trans-Pacific. Govt initiatives such as the BN of UFB fundamentally change user behaviour. Look to HK's per subscriber download per month now they have a NBN, compared with Aus or NZ. Demand increases exponentially, price decline is ubiquitous however look at the global market trends, investors are still investing in submarine cable projects (e.g.trans-Atlantic)where robust business cases prevail.
What will REANZ do now they gambled on marketing hype and now have nothing. Its off cap in hand to Southern Cross for a price that will make thier eyes water.
Great choice, great management, who is going to be held responsible.
NZ is just a "service station" for the AU - US traffic and alternative route to Asia. These cable systems can now support 40G/100G per wavelength and depending upon link engineering I expect SX to support 30-50 wavelengths. I expect they have more than one pair for traffic so you could double that in terms of capable capacity. (less fibres are deployed due to high costs as each fibre requires a series of AMPs & power along the route and therefore cost sky rocket the more fibres you deploy) the usual is between 2-4 pairs. So capable capacity out of NZ is not the issue
The cost per bit to access the internet has dropped dramatically over time. The issue is usually when you buy capacity off SC in 15yr IRU chunks so if the price falls for a service I don’t believe they reflect that change in the contract you signed. All new capacity is at the new price….
What cost will people be happy to pay ????
Having only one cable serving New Zealand is a disaster waiting to happen. It has already had one outage of over 12 hours - fortunately that was back in the early days where internet was dialup and there were other alternatives. It will happen again. We need a backup service like Pacific Fibre, as the consequences of another multiple break would now be dire.
There are actually two cables into NZ, one direct to the USA and the other to the US via Australia. The idea that there is a problem with redundancy is a myth.
This cable will struggle in my view.
[NBR's previously covered that the Southern Cross Cable has two strands to its figure 8 configuration.
The point here is that it has monopoly ownership. A new player will introduce price competition. - CK]
CJ, the rest of the world pays between 20cents and $2 per megabit for international cable access. New Zealand and Australia pay around $40 - $100 per megabit. It therefore is no surprise that we have severe data caps, and obviously there is an ownership bottleneck holding our prices up.
Mal, the rest of the world isn't based on some rock many thousounds of km from any of the major population centers of the world. The rest of the world also creates a bunch of content that other parts of the world wish to see , so there is a trade balance on content...