05 Feb 2014
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State of Orcon; We dig the dirt

By Heather Wright

Orcon has begun capital raising in an effort to support the rapid growth seen off the back of the uncapped broadband campaign, fronted by Kim Dotcom.

Greg McAlister, Orcon chief executive, says the residential and small business ISP is seeing significant growth on the back of its uncapped fast broadband offering, with average revenue per user up and customer churn the lowest in four years.

“We have just gone through really significant growth and that means we do need some more investment to ride that wonderful growth wave,” McAlister says.

He says the company is 'looking at options' at this point, and can't say what form the capital raising will take.

Kordia sold Orcon to a group of New Zealand business people, headed by Vivid Networks managing director Warren Hurst, in April 2013. The current ownership comprises 48% Semple Investments, which is owned by Hurst and Orcon COO Tony Reimann, and 52% ACL Nominees, a consortium of business people who wish to remain private.

At the time, David Clarke, Kordia Group chairman, said that under Kordia, Orcon's annual turnover had increased by almost 400%. He noted that structural changes in the market place meant 'there are likely to be better opportunities for Orcon with a different owner'.

Orcon released its uncapped fast broadband plan in October with Kim Dotcom fronting the advertising campaign with the bold claim they were joining forces 'to smash New Zealand's restrictive data caps and fight the plight of third world internet in New Zealand'.

The campaign sparked an Advertising Standard Authority complaint, with the ASA branding the ad 'ambiguous', because the average consumer would associate the word 'unlimited' with data and 'truly' to speed, and calling on Orcon to end the campaign. In December, Orcon appealed the decision and also dropped it's Fair Use Policy – something the ASA had highlighted as an issue in truly 'unlimited' broadband, as it allows the company to restrict customers.

McAlister says Orcon customers 'are free to go crazy and use as much data as they want'. He notes some customers are using nine terabytes/month on the residential unlimited plans.

He says in the period immediately after the launch of the campaign, the company saw sales skyrocket 70%.

“And since then, we've seen consistent growth in sales.” While sales aren't disclosed, he says they've been 'very strong' including throughout the normally quieter Christmas period. “And now we're heading into the busiest period of the year.

“If you look at our other metrics we traditionally measure on, they're all looking good. Our customer churn is now the lowest it has been in four years and the average revenue per user is bucking the industry trend and increasing.”

McAlister says that increase is because 70% of new customers are opting for the unlimited premium offering, which costs $99/month, rather than going for the cheaper plans. That in turn has meant Orcon's customer mix has moved from predominantly price conscious users to more premium customers.

McAlister says brand awareness for Orcon has also skyrocketed, and brand preference is now twice the size of the current market share.

McAlister was speaking after being approached by Techday about rumours the company was in financial difficulty - something McAlister and Hurst both categorically deny.

“I can assure you the company is solvent,” McAlister says. “Every month as an organisation our board has to have confidence that the business is solvent and they do.”

Adds Hurst of suggestions Kordia was still owed money from the sale, and interest payments to the bank hadn't be made: “Everything due to Kordia is up-to-date. Re the bank, [the payments have been made] in full, on time, every time, without fail.”

The pair also shot down rumours the business was being put up for sale on April 1, with McAlister laughing as he noted the date – April Fools Day.

“We are growing strongly. We are looking to bring more capital into the business, and we're looking at options for that,” he says, noting that may have been where the rumours started.

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