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Spark NZ reveals Vocus joint venture to drive Kiwi fibre future

Spark New Zealand will form a fibre construction joint venture with Vocus Communications called Connect 8...

Spark New Zealand has announced it will form a fibre construction joint venture with Vocus Communications called Connect 8 to further safeguard New Zealand’s fibre future.

The move comes at a time when the telecommunications market is rapidly changing.

Both business and consumer customers are increasingly demanding faster speeds with better resiliency in response to an increased demand for digital services.

David Havercroft, Chief Operating Officer for Spark New Zealand, says the joint venture puts Spark in a strong 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," he says.

"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.

“Spark New Zealand is investing hundreds of millions of dollars every year to provide customers with better services, strengthening and expanding our integrated network, including the rolling out of world-class 4G services using more of the latest 700 MHz spectrum than any other provider."

Havercroft says the telco now has 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; "all of which is underpinning excellent connectivity and capability for business customers."

Chief Executive of Spark Digital, Tim Miles, says that Connect 8 will benefit the business division of the company as it continues to reposition its focus to Cloud Infrastructure, mobility, managed ICT and platform-as-a-service.

“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," he says.

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“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.