Kordia posts loss, talks up new transtasman cable

The Southern Cross cable comes ashore at Takapuna Beach, Auckland in 1999. State owned Kordia has today talked up prospects of installing a new trans-Tasman cable. Photo / Russell Smith.

State-owned broadcast and telecommunications business Kordia Group Ltd today posted a net loss - after tax and restructuring costs - of $1.1 million on revenues of $253.6m.

Kordia said a second-half net profit after tax of $4.7m reversed a first half loss and produced a full year net profit after tax of $1.1m before restructuring costs of $2.2m.

The restructuring costs were driven substantially by redundancies in the New Zealand engineering consultancy business, formerly known as Transmission Holdings.

Kordia chief executive Geoff Hunt said the result was pleasing given the company's recent high levels of capital investment.

Over the past three years, Kordia has invested a total of $167.2m in switching the business from pure broadcast to a broader telecommunications, media and technology sector, and at the same time has paid its state shareholder dividends totalling $26.0m.

Hunt said the development of a new Optikor fibre-optic cable from Auckland to Sydney was another potential string to Kordia's bow.

"What is compelling about the Optikor trans-Tasman cable initiative is the fact that Kordia's project development work has provided a catalyst for real competition in the wholesale international bandwidth market," he said.

The cable is planned to land in Waiuku, south of Auckland, and expected to cost around $200m to connect to Pipe Network's Sydney landing station.

Optikor would compete with the Southern Cross Cable Network - the only submarine cable provider to New Zealand - which is 50 per cent owned by Telecom, 40 per cent by SingtelOptus and 10 per cent by Verizon Business.

Kordia chairman David Clarke said introduction of the Optikor cable could bring competitive pressures, lowering prices for New Zealand businesses and broadband users.

The new cable would mean more direct and improved services, and could reduce the risks business faced in accessing Australia.

"Kordia's intention is to deliver the economic benefits of fast, competitively priced international access to all New Zealanders," said Clarke.

Directors were "very pleased" with the progress on Optikor and he confirmed that work will continue to ramp up over the next six months or so.

The company has claimed that structural limitations of New Zealand's existing cable link provide a market opportunity for Optikor.

While Southern Cross has been trialling technology that could increase the capacity of its existing cables to meet likely short-term demand, a lack of competitive choice and options for physical diversity had attracted growing support for an alternative service provider, Clarke said.

"Our proposed cable will take the most direct, quickest and least expensive route for New Zealand customers," he said.

He claimed Southern Cross had dropped its prices over 75 per cent in the 18 months since Kordia announced its plans, and the new project had provided a catalyst to encourage competition and lower prices.

Kordia hopes to award a contract in early 2010 for the installation of the cable.

Hunt said the Kordia Group had been transformed from a "sunset", analogue, broadcast-centric business to new services and products.

"Our revenue mix has changed dramatically," he said.

Though the company originally provided the "backbone" for the nation's broadcasters, its New Zealand businesses were now strongly weighted towards the telecommunications market.

In Australia, Kordia Solutions was earning over 80 per cent of its revenue from the telecommunications market.

And Kordia Networks in New Zealand was developing new offerings such as Onkor (for carrier ethernet) and Korkor (for integrated, two-way, digital radio).

Its internet network Orcon continues to grow at more than 30 per cent a year, and was likely to turn over in excess of $52m this year.

Hunt said Kordia would focus over the next three years on driving returns from its network business investments and reducing debt to provide a gearing of about 40 per cent, down from the current 52.1 per cent.

- NZPA