Profitability enables Orcon to pursue plans for growth

Iggy Pop plays a key role in Orcon's latest online promotion. Photo / Supplied

Phone and internet company Orcon is in the black and preparing for its next wave of growth.

Orcon, bought by state-owned communications company Kordia from founder Seeby Woodhouse in 2007 for close to $25 million, has been big on ambition but not profitability.

It made a loss in the financial year to June 2009 on top of a $3.5 million loss for the previous year.

Chief executive Scott Bartlett said the company had since become profitable and was readying for the "next big play" on the back of the Government's billion-dollar fibre network initiative.

"Now that Orcon is profitable ... we can take a longer-term view of the investments that we make because we are no longer a loss-making business," said Bartlett.

While unprofitable last financial year, Orcon did increase its revenues 37 per cent to $39 million.

The Kordia statement of corporate intent details plans to repeat that growth this year to take Orcon revenues to $52 million, with the aim of hitting $72 million in 2012.

To date Orcon has focused on local loop unbundling - it has equipment in 38 exchanges with six more to come onstream shortly - but Bartlett said that will now shift to upgrading its exchange technology to VDSL2 and putting equipment into Telecom's new roadside cabinets.

Telecom's network arm, Chorus, is nearly a third of the way through the rollout of 3600 new roadside cabinets.

The cabinets work as mini-exchanges for homes and businesses more than 2km from the local exchange, boosting broadband speeds over the remaining length of copper cable.

When the Commerce Commission announced in June the regulated pricing for access to the Chorus cabinets - sub-loop unbundling - Orcon responded saying the service was "prohibitively expensive".

"We simply cannot see any one player having the necessary fixed-line market share to deploy new infrastructure, certainly no single player does today," said Bartlett at the time.

While saying the economics remain "really, really tricky", Bartlett said the promise of competition opening up for fibre backhaul makes it more viable.

"We'll be able to use that fibre to provide the backhaul service and not necessarily the regulated one from Chorus, because that's just too expensive," Bartlett said.

"To be honest, we wouldn't be making any sub-loop investments if the Government wasn't making its investments into fibre. It'll be using that fibre to really kick-start that project."

Future plans include placing equipment in half of Auckland's 1000 installed or soon-to-be-installed roadside cabinets. The company is testing the service in Mairangi Bay on the North Shore.

Bartlett said its VDSL2 technology offer would be available to consumers in six months, hot on the heels of the long-awaited launch of mobile phone services in the new year.

Telecom Wholesale is also testing VDSL2 in exchanges around the country but has yet to announce a launch date.

Vodafone said 20 per cent of the connections on its equipment in unbundled exchanges were VDSL2-capable but it is also yet to announce a start date for services.

"We think there is still a market for copper-based services running up to 100 megabits for around the next eight to 10 years," said Bartlett. "That's the sort of timeframe that we believe it's going to take before there is fibre to every home in, say, a city like Auckland."