Kordia's international cable delayed

Uncertainty surrounds Kordia’s plans to build New Zealand’s second international cable, with delays caused by the imminent sale of its Australian partner PIPE Networks.

When Kordia announced the project last year, chairman David Clarke said the “key objective” was to award a contract in early 2010. However this first step will now be delayed by up to four months.

Kordia CEO Geoff Hunt says the delay is due to its partner in Australia – PIPE Networks – selling out to Soul/TPG late last year. The sale process began in November last year and is expected to be completed by March 2010.

“PIPE and Soul/TOG are entirely focussed on each other at the moment and we need to wait until they’ve finished working through (the sale),” Hunt says.

However he says the Memorandum of Understanding that Kordia signed with PIPE over 18 months ago is likely to still stand.

“I would expect that to remain valid,” he says. “But changes of ownership bring differences, don’t they, so that’s still to be worked through.”

Telecommunications Review has sought comment from PIPE Networks, however its managing director Bevan Slattery is currently in transit from Hawaii, where he attended the Pacific Telecommunications Council. Kordia’s corporate affairs general manager Susie Stone was also in attendance.

There are at least four international cables – including the Southern Cross Cables owned primarily by Telecom and another cable owned by Telstra – connected to Australia, however Hunt wouldn’t comment specifically as to whether he was in discussions with PIPE’s competitors.

“We’re always looking at alternatives and always looking at what are the other options but there’s nothing I’d want to comment on, other than to say we’re continuing to look at all possibilities.”

The original plan is for Kordia to build a trans-Tasman cable that connects to PIPE’s Sydney to Guam cable, and from Guam to the US.

“A cable wouldn’t just be connectivity between NZ and Australia; it provides lower cost connectivity between NZ and the US. PIPE is an important part of that,” he says.

Hunt says in the meantime Kordia is working on the “peripherals” such as talking with vendors and building a customer base for the cable project they’ve called Optikor. He says the price tag for a new cable is likely be less than $200 million, however he won’t say how many customers they will potentially sign up.

He says in the past year most businesses – including Kordia – have been focussed on short term gains as they worked through the recession. When asked whether the delay in building Optikor might mean for potential customers, Hunt replied: “It could be that potential customers are relaxed about delays because of the short term focus on financial performance.” Optikor is one of a number of new business ventures that Kordia has undertaken in order to remain a viable entity once its core business – analogue television – becomes obsolete with the switch over to digital in the next five years.