Editorial: Telecom slims down, Kordia sells up

Sarah Putt looks at the re-invention of Telecom and the sale of Orcon

The re-invention of Telecom is well underway, with a combination of strategic hires and mass redundancies.

It appears that central to CEO Simon Moutter’s transformation of the telco is Gen-i. There is the appointment of Tim Miles, a seasoned telco veteran. He in turn has hired Robin Hartendorp, formerly head of Dimension Data, to the role of general manager central government, based in Wellington. Now it’s been revealed that Gen-i is doing due diligence on Revera.

Last year Moutter told Computerworld that in addition to a $10.5 million datacentre in Christchurch, the company will build major datacentres in Auckland (Takanini) and Wellington (Upper Hutt), which will open in the next couple of years. But he would not say how much these will cost.

The possible acquisition of Revera – which opened a new tier 3 datacentre in Upper Hutt last year – would appear to fit neatly into those plans. It would also get Gen-i a seat on the government’s Infrastructure as a Service panel, which consists of Revera, IBM and Datacom. As Miles pointed out in an interview with Computerworld, Gen-i would have to convince the Departement of Internal Affairs to re-open the panel and as the process of selecting the orignal vendors dragged on for months, that would be a tough sell.

As for the announcement of up to 1230 redundancies at Telecom by the middle of the year, it was widely expected, but that won’t make it easier for those staff members who are affected.

Leaked emails to Labour’s ICT spokesperson Clare Curran, which were reported in the Dominion Post last week reveal that Moutter is cracking down on employee benefits and bonuses. Staff should therefore expect lean times for the forseeable.

“So if you don’t think this is the place for you anymore, then you should feel free to talk to the human resources team about your options,” Moutter wrote in the internal email to staff.

Employment lawyer Peter Cullen described the email as “pretty brutal” but at least its unambiguous. Telecom can’t rely on profits from a monopoly fixed-line infrastructure to maintain a staff of 7000 following the demerger of Chorus. Just look down the road at Vodafone/TelstraClear with its smaller staff count of 3200.

Telecom’s investor day in which Moutter will outline its strategy to analysts will take place in Auckland on May 16. But already analysts are predicting further cost cutting, and that would mean more job losses.

Meanwhile, Kordia has sold its ISP, Orcon, to a group of private investors fronted by Warren Hurst, who is a director of Vivid Networks, a company offering bespoke WAN services.

The new chief executive is Greg McAlister, whose most recent role was at Vodafone as general manager - product marketing. But what to make of the appointment of Maurice Kidd to the new Orcon board? Kidd has been closely associated with Eric Watson in the past, so is Watson one of the mystery investors?

Also, the amount Orcon was sold for remains secret. Kordia is claiming the price is commercially sensitive, although quite why – when it was prepared to shout from the rooftops how much it paid for Orcon ($24.3 million) in the first place – hasn’t been explained.

I asked Hurst why he thought no one had bought Orcon, when it was apparently being shopped around last year. He offered the personal observation that if you were an existing provider you’d have to weigh up the cost of buying 50,000 more subscribers as opposed to going out and getting them.

The pain of merging Orcon into your operation probably wouldn’t make it worthwhile.

Hurst’s group was interested in Orcon for its technology and once it began investigating, it found there was a lot to like about the business, including a strong international wholesaling operation which comprises around 15 percent of Orcon’s revenue.

“We’ve just come to get really excited about the business,” Hurst says.

Good for them, and good luck too.

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