TeamTalk puts off CityLink fibre capex in Powerco, Wgtn Cable Car deals
TeamTalk expects to have more cash on hand after reaching two deals to slim down and put off major capital spending on its CityLink fibre network.
The Wellington-based telecommunications company has signed agreements with lines company Powerco and Wellington City Council-owned Wellington Cable Car Ltd that will reduce its expected capital expenditure needed for the CityLink fibre network in the capital city, and push out that spending for a couple of years.
The Powerco deal grants will see CityLink assess the suitability of underground ducts for carrying cable and negotiate a deal for their exclusive use, which could allow for extended network coverage while lowering forecast capital spending. The WCCL agreement lets CityLink use building stays - part of Wellington's trolley bus infrastructure - to maintain above-ground support until Jan. 31, 2021, giving the network company more time to migrate the 36 kilometres using the trolley bus lines before that transport service is shut down.
"These agreements have significant value and strengthen TeamTalk's position as a wholesale fibre provider," chief executive Andrew Miller said in a statement. "The WCCL agreement enables the company to defer and substantially reduce the quantum of our capital expenditure while the Powerco agreement provides TeamTalk with exclusive access to existing underground ducting."
TeamTalk had been expected a sharp increase in capital expenditure through to 2020 as the company upgraded its Wellington fibre network and mobile radio network, forecasting capex of 12-to-14 percent of annual revenue, which was $57.3 million in the year ended June 30, 2016. That was tipped to drop to about 6-to-8 percent of revenue from 2021.
Last month, TeamTalk's shareholders overwhelmingly backed a deal to sell a controlling stake in its rural broadband unit Farmside to Vodafone New Zealand, killing a hostile takeover bid by Spark New Zealand.
The shares last traded at 71 cents and have jumped 65 percent so far this year.