Kapiti subsea cable shelved

Plan could resurface if Kordia bows out

NZX-listed telco TeamTalk has mothballed a proposal to build a submarine telecommunications cable between Kapiti and Sydney following the Government's decision to invest public money in a new international link.

But chief executive David Ware says the project could still be revived if a bid by state-owned enterprise Kordia to build an Auckland-Sydney cable falls through.

The Government earmarked $15 million in the Budget to assist in the construction of a new cable which would break the Southern Cross Cable's near monopoly over high- speed international communications links.

Communications Minister David Cunliffe has suggested the added competition would result in cheaper broadband for businesses and consumers.

The funding is expected to be channelled through Reannz, which runs a high-speed research network linking tertiary institutions and which would become a foundation customer for the new cable.

Mr Ware revealed TeamTalk had invested "quite a bit of money" developing a business plan for its own undersea communications cable before the government funding was announced.

But it shelved the idea after Australian-listed Pipe Networks announced in April that it had signed a memorandum of understanding with Kordia.

"We were very keen on the idea and we spent a lot of time researching it. The idea was we were going to link in with Pipe Networks," Mr Ware says.

"Then Pipe did a 'beauty contest' to see which was the best partner to have in New Zealand, and when the Government announced it was making $15 million available, it kind of pushed the thing into 'SOE' territory and us out the picture – which was a real shame."

It is understood that Kordia would pay the entire $50-$60 million cost of laying a cable between Auckland and an undersea junction just off Sydney, where it would join a cable that Pipe is building between Sydney and the regional hub of Guam.

Mr Ware says there is only a market for one more trans-Tasman cable, and the cheapest way to lay it would be to extend Pipe's cable to New Zealand. That would only involve contracting the cable- laying ship that will lay its Guam- to-Sydney cable for an extra two weeks.

However, there is widespread speculation that Kordia is finding it difficult to make a business case for the investment.

Mr Ware says that if that proves the case, the Kapiti cable could be back in the running.

Sources suggest that Pipe could choose to dispense with a "middleman" altogether. It could then bid for the Reannz tender directly and foot the bill for the trans- Tasman cable itself – which could throw the choice of a New Zealand landing point wide open.

TeamTalk owns CityLink, which operates an "open access" fibre network that is used by government departments and corporates in Wellington, including special effects shop Weta Digital.

"We think there is a lot of demand out of Wellington and it would be good for the region. It is also good for the country to have a bit more physical diversity," Mr Ware says.

The Southern Cross cable comes ashore in Auckland.

Mr Ware says it is hard to predict demand for submarine cables. "Until you sit down in front of [customers] and ask them to sign a contract, you are never one hundred per cent sure."

TeamTalk last week reported a 26 per cent jump in revenue for the year to June, posting a net profit of $4 million on revenues of $31 million. Mr Ware says that was largely thanks to CityLink.

- © Fairfax NZ News