Telstra and Spark Ink Deal for New Tasman Cable
By Rob O'Neill, New Zealand Reseller News
October 1, 2019
Spark and its fellow Southern Cross Cable shareholders have inked agreements and received regulatory approval for Telstra to become a 25 per cent shareholder.
Telstra will also become an anchor customer of the new Southern Cross Next undersea cable, the building of which will now proceed.
Next has been developed as an extension of the existing Southern Cross cable ecosystem and when completed is expected to be the lowest latency path from Australia and New Zealand to the United States, Spark said.
“The transaction will complete subject to certain conditions being satisfied,” the company said. “These are procedural in nature and are expected to be satisfied within the next few days.”
Build costs for Southern Cross Next are expected to be approximately US$300 million and will be funded via a combination of debt held by Southern Cross, the retention of dividend streams from the existing cable network during the build phase and further equity investment by Southern Cross shareholders.
Spark said no dividends expected to be received from Southern Cross in the 2020 and 2021 financial years. The company's results have already been impacted in 2019 by the loss of those dividends.
As a consequence of the deal, Telstra will become a Southern Cross shareholder and Spark’s shareholding will be diluted from 50 per cent to approximately 40 per cent.
Spark expects to contribute a total of between $70 and $90 million of equity across 2020, 2021 and 2022.
The new cable will deliver greater certainty of supply and is expected to generate strong long-term returns, with dividend receipts expected to resume from 2022.
Southern Cross and Alcatel Submarine Networks sealed an agreement in April for the supply of the cable.
As well as Spark, the cable company was owned by SingTel Optus (40 per cent) and Verizon Business (10 per cent) before today's deal.