The Technology Investment Network report shows that IT services companies grew by 11 percent last year on the back of strong sales in the Australian market.
Two companies that didn’t feature in that report are Northpower and Kordia. Perhaps because they are owned by the taxpayer/ratepayer, perhaps because they provide electricity/telco services. Whatever the reason for their exclusion, it’s worth looking at their operations because both have their roots in providing monopoly infrastructure services, both have extended their operations to provide broadband-related services and both have enjoyed success across the Tasman this year.
Northpower was established in 1920 to provide electricity to Whangarei and Kaipara districts, but in recent years it has expanded its operation. From 1999 Northpower Contracting has won contracts outside the area, including the maintenance for half of Vector’s Auckland electricity network.
In 2008 Northpower created a subsidiary to provide services to distribution companies in Perth and Melbourne. Around the same time it began building a fibre broadband network in Whangarei, and it was then awarded the area as part of the government’s Ultra Fast Broadband network.
Its annual review shows that the revenue for the 2011/2012 financial year was $55.1 million from its core network, $40.4 million from its Australian operation and $146.6 million from its New Zealand contracting operation.
The report notes that group net profit rose 25 percent to $9.6 million, thanks to a strong performance from the network division and the Australian contracting division.
Northpower’s ownership was invested in a consumer trust in 1993. The trust is made up of elected trustees from the Whangarei and Kaipara Districts.
Residents directly benefit from Northpower’s profits in two ways - a tax free credit and a 'line holiday'. In November 2011 they received a $70 tax free credit, which was distributed via the consumer trust. In March 2012 they received a line holiday directly from Northpower, that is a discount on their March electricity bill of between $35 and $145.
Every five years the ownership is publicly reviewed, and it so happened that this year was a review year. The decision has been made to retain the status quo. I had a look at the website of The Northern Advocate to see how this was received locally, and found this quote from an editorial: “If you too are fortunate enough to live in the Northpower area, you know the delight of grimly ripping open the electricity bill only to find instead, the unexpected relief of glorious credit, thanks to the godsend of the annual Northpower dividend.”
Kordia is a State Owned Enterprise and was previously the transmission arm of TVNZ. Its assets include broadcasting spectrum, a telco network, an Australian contracting business and an ISP.
Kordia has had a good year across the Tasman – it won a $117 million contract to provide a communications network for a coal seam gas project in Queensland. The Australian business has a turnover in excess of $100 million.
“We grew 35 percent across the whole group last year, we’re a $400 million turnover business,”CEO Geoff Hunt says.
At home, things don’t appear to be as rosy. Orcon was widely believed by the industry to be up for sale, but it was announced recently that the ISP will be rolled into Kordia Networks and 50 contact centre jobs will be offshored to Manila.
In the past financial year, Kordia returned a dividend of $2 million to the government.
SOE Minister Tony Ryall’s office forwarded me the following statement. “Kordia is an SOE - required to act independently and be answerable in running its own business, but shareholding ministers are kept updated on a no surprises basis.”
The government says it has no plans to sell Kordia.
Like Northpower, Kordia has managed to create a strong business outside of its core competency. But, unlike Northpower, Kordia has arguably failed to engage its owners – the taxpayers — and its purpose is unclear.
If it exists to make money for its shareholder – us – then the $2 million dividend is a tiny drop in the bucket of government revenue. If it exists to provide local employment, then outsourcing jobs to Manila is a strange decision. If it exists to transmit broadcasting signals, then why is it in the ISP business?
Kordia is holding a public meeting later this month, but is it enough? As an industry we should be demanding real engagement.