Published on the 05/02/2015 | Written by Clare Coulson
Spark and Vocus have entered in to a joint venture in a move that has surprised some in the industry…
Spark has taken a 50 percent stake in Vocus Communication’s construction division to form a fibre construction joint venture to be called Connect 8. The move is expected to improve Spark Digital’s ability to service the enterprise sector with fibre connectivity.
In terms of the deal, Vocus will sell its New Zealand construction division into the new joint venture at which point Spark will acquire 50 percent of the new business for an undisclosed upfront cash payment and an agreed level of annual construction spend.
Spark is framing the acquisition as an indication of its “commitment to being the leader in data network capability and data services for New Zealanders”. It said both business and consumer customers are increasingly demanding faster speeds with better resiliency in response to an increased demand for digital services.
Vocus, meanwhile has secured an annual revenue stream from Spark in the form of pre-committed construction spend, shoring up the fibre side of the Vocus business. According to Vocus, Connect 8 is expected to have an annual committed revenue pipeline of between NZ$15-17 million and will continue to build fibre and telecommunications assets for Vocus, Spark New Zealand and other New Zealand clients.
Putting the acquisition into context, IDC’s head telecommunications expert Peter Wise said: “It appears as though Spark Digital wants more control cover the supply of fibre – so, that last mile access for their large clients.” Although the ‘divorce’ is over in terms of the separation of Spark and Chorus, Wise said that, for whatever reason, Spark Digital was previously procuring connectivity only from Chorus. “Now it will effectively have another supplier in which it has a 50 percent share,” he said, adding that Vocus is essentially a competitor to Chorus.
“It creates more competitive tension in the supplier side and Spark gets more control over its destiny,” he said, adding that it was an interesting move for Spark to buy back into a business it had exited, albeit at the top end of the market.
For Wise the deal is really about Spark Digital’s ability to provide high-end fibre to its enterprise customers. Chorus has largely been focused on building the UFB which is more of a mass market offering, while Vocus is more focused on the enterprise level networks and dark fibre. Wise also said that he has heard Vocus is quicker with its construction than its competitor.
Spark Digital chief executive Tim Miles confirmed Connect 8 will benefit the company’s business division as it continues to reposition its focus to cloud infrastructure, mobility, managed ICT and platform-as-a-service. “The potential benefits of fibre are still largely untapped by New Zealand businesses and flexibility of construction and delivery can be one of the challenges in making the most of that opportunity. The joint venture will allow Spark Digital to add Vocus Communications construction capability to our network delivery options.”
