Pacific Fibre, Pacnet abandon joint venture - but Pacnet could be anchor customer

UPDATE 5.30pm: Pacifc Fibre chief executive Mark Rushworth told NBR that Pacnet was brought onboard because if the two companies shared the build cost, it would have lowered the capital required.

However, how that Pacnet has walked, Pacific Fibre is "Very comfortable that we can raise the total alone." (The total being $US350 million for a Sydney-Auckland-LA cable.)

Pacnet also "provided technical capability and knowledge," Mr Rushworth added. "But since we recruited [business development director] Mike Constable (from Pacnet), that's no longer necessary."

Bombshell
Mr Rushworth then dropped a bombshell - or perhaps depth charge is the right word, given the submarine cable context:

"We are in discussions with Pacnet on becoming an anchor customer."

If Pacnet - currently the largest wholesaler of the 50% Telecom-owned Southern Cross Cable - does become an anchor Paciific Fibre customer, then that will surely shake-up our international broadband scene.

UPDATE 4.30pm: Pacifc Fibre chief executive Mark Rushworth told NBR: "Pacnet didn't let the MOU [memorandum of undestanding] lapse. It was by mutual agreement. [It's a] big benefit for us. We aren't enabling a competitor on our system."

NBR's response: if the 50-50 joint venture enabled Pacnet (a major wholesaler of the 50% Telecom-owned Southern Cross Cable), then why sign the MOU in the first place. We await Mr Rushworth's response. 

11.30am: Pacific Fibre's 50-50 joint venture with Hong Kong-headquartered Pacnet is on the rocks.

Chief executive Mark Rushworth revealed this morning that a memorandum of understanding the Pacnet expired earlier this year.

For several months, Pacific Fibre has been operating on the assumption it would have to build its Sydney-Auckland-LA cable alone, Mr Rushworth said.

The Pacific Fibre boss did not immediately respond to NBR's query over why Pacnet walked.

Pacnet's industry hooks
The joint venture agreement was announced in July last year.

The news not only means Pacific Fibre has a steeper capital raising task for the $US350 million project.

It also loses leverage. 

NBR understands that Pacnet is Southern Cross Cable's largest wholesaler.

Southern Cross Cable, incorporated in Bermuda, is 50% owned by Telecom, 40% by SingTel Optus, and 10% by Verizon.

Keeping the Asian/Australian operator in the Pacific Fibre camp would have been a major coup.

But now, it's not to be.

Invitation to tender
In its new, go-it-alone mode, Pacific Fibre announced today that its Invitation To Tender was released to "selected vendors".

The 5.12 Tbit/sec two fibre pair system, which includes new build cable landing stations in each country, will allow Australian and New Zealand carriers to secure supply of sufficient capacity to take advantage of the NBN and UFB fibre rollout plans, the company said in a statement.

Recently hired business development director Mike Constable, responsible for leading the build of the cable system, said "This is a significant milestone in the project development phase and shows the momentum Pacific Fibre has built towards achieving its goal. The 450 page document reflects the considerable work we have put into the design and configuration of the cable system and provides the basis of the contract which we expect to execute with a selected vendor in the third quarter this year."

Vendor responses are due in mid-May with contract negotiations expected to commence with a preferred.

Some lettuce to pay for the tender
Founded by Rich Listers Sam Morgan, Rod Drury and Sir Stephen Tindall, Pacific Fibre has had four rounds of minor funding, including a $5 million round in which Facebook and Paypal billionaire Peter Thiel invested, but has yet to reveal any news on the kind of anchor tenant or investment bank banking that would green-light the cable. No doubt a vendor-financing option will help would-be respondents to today's Invitation to Tender.