Spark New Zealand is to form a fibre construction joint venture with Vocus Communications called Connect 8 in order to drive the deployment and delivery of fibre network services across the country.
Australia-based Vocus said it has agreed to sell its New Zealand construction division into the new joint venture, with Spark acquiring 50% of the business for an undisclosed upfront cash payment. Connect 8 will continue to construct fibre and telecoms assets for Vocus, Spark and other telecoms providers in New Zealand.
After an initial start-up period, Vocus said Connect 8 is expected to have an annual committed revenue pipeline of between NZ$15 million-NZ$17 million. Vocus and Spark will be equally represented on the Connect 8 board and receive equal distributions of profits.
David Havercroft, COO of Spark New Zealand, said the joint venture puts Spark in an even better position to help New Zealand businesses navigate a digital future in which fibre will become increasingly important.
“Spark New Zealand already has 8000 kilometres of fibre cable in New Zealand. This, paired with the Optical Transmission Network (OTN) – the core data transport network – connects more cities, exchanges and data centres than any other network provider in the country,” Havercroft said.
He noted that Spark New Zealand is investing hundreds of millions of dollars every year in its integrated network, including the rollout of 4G services using 700 MHz spectrum.
“We’ve now got New Zealand ’s leading data network integrating 3G, 4G, WiFi, ADSL, VDSL and fibre, backed up by a nationwide optical transport network and a growing number of data centres,” Havercroft claimed.
Spark Digital CEO Tim Miles said the joint venture would allow Spark to benefit from the construction capabilities of Vocus, and would add more flexibility and control to its delivery time frames.
“We know that the potential benefits of fibre are still largely untapped by New Zealand businesses, and that flexibility of construction and delivery can be one of the challenges in making the most of that opportunity,” Miles commented.
Vocus noted that its New Zealand construction division, which was acquired as part of the FX Networks acquisition, has on average generated annual revenues of about NZ$11 million and EBITA of around NZ$3 million – “although with significant volatility from period to period”.
“The Connect 8 joint venture and its committed pipeline will help mitigate earnings volatility from the construction division, providing Vocus with a stable earnings profile from the joint venture while maintaining access to its industry expertise and substantial construction intellectual property,” said Vocus CEO, James Spenceley.
