“The joint venture will allow Spark Digital to add Vocus Communications leadership and construction capability to our network delivery options.
"It also gives us more flexibility, supplier-capacity, and control over delivery time frames - therefore enabling more businesses to get on with unleashing their digital potential.”
Under the joint venture agreement, Spark New Zealand will acquire 50% of the Vocus Communications construction business.
Connect 8 will continue to construct fibre and telecommunications assets for Vocus Communications, Spark New Zealand and other telecommunication providers in New Zealand.
Vocus Communications and Spark New Zealand will be equally represented on the Connect 8 board and receive equal distributions of profits.
“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,” adds James Spenceley, CEO, Vocus.
The Vocus New Zealand construction division, acquitted as part of the FX Networks acquisition, has on average generated annual revenues of c. NZ$11m and EBITDA of c. NZ$3m, although with significant volatility from period to period.
As a result of the sales process, the construction division’s first half FY15 EBITDA contribution of NZ$1.5m will not be realised.
Vocus expects an ongoing baseline annual EBITDA contribution from the joint venture of NZ$2.3m from its first full financial year.