Orcon signs bandwidth contract with wannabe second Pacific cable provider Hawaiki
UPDATE Sept 11: Orcon says it has bought a "multi-million dollar" major chunk of capacity on the proposed Hawaiki cable linking Australia, New Zealand and various Pacific Islands to the US.
Orcon, which was acquired by a consortium of local business people from Kordia earlier this year, says the deal will see the ISP purchase 40Gbps capacity in year one, with substantial increases planned in additional years, that it said will help to unlock the potential of New Zealand’s broadband market.
The deal follows a Hawaiki contract with the Northland Regional Council which will help Hawaiki with NZ landing rights for its cable. The Council will also try to find local investors to help make the $450 Hawaiki cable happen.
And it follows a Hawiaki anchor customer contract with Australia's TPG, which appears to be worth $US10 to $US20 million over three years.
Signing anchor customer deals is no guarantee of success.
Pacific Fibre had Vodafone, iiNet, CallPlus and Reannz in the bag, but still couldn't convince enough potential investors to raise more than half the $400 million it sought for a Sydney-Auckland-LA cable.
And there will be an element of gaming. Orcon and other ISPs need all the leverage they can get to help keep the 50%-Telecom owned Southern Cross Cable at heel.
Still, a bit of momentum's buildiing for Haiwaki. Good luck to them.
And it's nice to see Orcon getting in behind the newcomer this time. While under Kordia ownership, its CEO Scott Bartlett talked up Pacific Fibre, but Orcon never signed an anchor customer contract - no doubt because Kordia had its own Optikor transtasman cable plan (currently on the backburner).
TPG signs with Hawaiki
Aug 23: Many have tried to break the Southern Cross Cable’s monopoly as New Zealand’s only major broadband connection to the outside world.
Many NBR Rich Listers, that is. Pacific Fibre, backed by Sir Stephen Tindall, Rod Drury and Sam Morgan, gave up on its plan to lay a $NZ400 million cable from Sydney to Auckland to LA after raising less than half the necessary funds.
And a proposed Auckland-Sydney cable, backed by Chinese companies Huawei and Axin, sank without trace after political opposition across the Tasman.
Now another contender has stepped up.
Hawaiki is trying to raise $US350 million to lay a submarine fibre optic cable linking Australia, New Zealand and various Pacific Islands to the US. It says the 14,000km cable will be completed by late 2015.
This week, the company’s Noumea-based chief executive and owner Rémi Galasso had some good news.
Australian company TPG has agreed to buy capacity on the proposed cable, with its chief financial officer saying it expects to spend $US10-20 million in capex related to the cable in the three years from 2014.
TPG is a credible player. It’s listed on the ASX, with a market cap of $A2.9 billion. Its interests range from a retail ISP service to its Pipe Pacific Cable between Sydney and Guam.
Still, it will be hard
Pacific Fibre had lined up a raft of anchor customers, including Vodafone, CallPlus, iiNet (Australia’s largest independent ISP) and Reannz, the Crown-owned company that runs a network connecting universities and research institutes. Collectively, the multi-year contracts were worth more than $100 million, and ANZ was willing to fund a similar amount in debt. Still, it was only about half what Pacific Fibre needed.
And on closer examination, Mr Glasso is not such a new contender.
The Frenchman has been trying to drum up support for this project since 2009 (initially under the SPIN network moniker).
Various partners have been mooted with previous attempts, from the French government to Kordia.
This time around, beyond bagging an anchor customer commitment from TPG, Hawaiki has also signed a memorandum of understanding with regional economic development agency Northland Inc to land the new cable in the Whangarei area.
Under the memorandum, “Northland Inc will aid both the landing and the funding of the cable, including sourcing local investors and promoting funding through the Northland Regional Council’s Investment and Growth Reserve.”
NBR hopes a second cable operator does jump into the NZ-US market. Two or more players are required for competition. And good luck to Hawaiki.
But it’s hard to see how Northland local government reps, and other Hawiaki partners, will succeed where Messrs Drury, Morgan and Tindall failed in their bid to raise $400 million for Pacific Fibre.
The only cable that’s actually in the works is the Telecom-Telstra-Vodafone joint venture to lay the second major cable between New Zealand and Australia (from where there’s a choice of multiple cables up to Asia and the US).
There are some question marks over that project, such as ISPs’ wholesale access terms; ownership percentages; and iffyness over 50% Southern Cross Cable shareholder Telecom also holding a stake in the new link. Still, it’s better than nothing, and at least it’s fully-funded, and set to go live in 2015.
Telecom shareholders can take that one to the bank.