Kordia: result will meet government's expectations

Tasman cable plan signed off yesterday, call for tenders approaches

The CEO of state-owned network infrastructure company Kordia says the company's annual result, released today, will answer the government's requirements.

"They've known about it for some time and it will meet their expectations," says Geoff Hunt. "They are continually updated about how the company is performing."

Earlier this year, minister of state-owned enterprises Simon Power called on the CEOs of state-owned companies to ensure they were delivering efficiently after returns from state companies plummeted.

Hunt says after a period of heavy investment Kordia's capital spending is about to return to levels seen between 2004 and 2006 as the company achieves transformation goals of shifting its business from a legacy analogue broadcast income to digital services.

"We've had to invest to get into new spaces. We've had to spend quite a lot of money to get there and have borrowed to get there," he says.

Hunt says repaying borrowings is now a priority with the company aiming to reduce its debt ratio to 40 percent from around 50 percent. He says Kordia will track back into profitability through 2010, but the company has no forecast to release yet. No dividends will be paid to the government for the next couple of year unless that debt repayment exceeds plans, he says.

With Kordia moving away from its analogue broadcast roots and into competition with private telcos and ISPs, the argument for it being retained in state ownership could be seen as weakening. Hunt would not be drawn on that issue, however, saying Computerworld would have to speak to the shareholder, the government, about that.

"My job is to run a successful business and deliver an appropriate return to the shareholder and to preserve shareholder value," he says. That has been achieved, he adds

Kordia has invested in a digital terrestrial broadcast platform, satellite platform and launched new products including its OnKor corporate ethernet service and KorKor digital radio service.

Hunt says interest in OnKor is strong and a number of customers are now on the service, despite not all features being available until December. A formal launch is planned for mid October.

As to the company's ambitions to lay a new trans-Tasman submarine cable (see map below), Hunt says development plans were signed off by the board yesterday. Tenders will now be called to develop final costings for the project.

Contracts also need to be finalised with foundation customers, he says. These customers will buy blocks of bandwidth for a fifteen year period at attractive rates in return for payment up front to help fund the build.

OptiKor, as the Tasman project is called, is a joint veture with Australia's Pipe Networks, which recently completed its PPC1 cable from Australia to the US. A separate company will be established to build and operate the OptiKor business, Hunt says.

Kordia hopes to award contracts early next year in the March to May timeframe. After that orders are placed with cable manufacturers and a cable laying ship has to be scheduled. While that is happening, on-shore facilities can be built, he says.

Kordia is still planning to land its cable south of Waiuku.

Kordia Group posted a $4.7 million second half profit, reversing a first half loss and delivering a full year profit of $1.1 million before restructuring costs of $2.2 million. It recorded $254 million in total revenue for the year ended 30 June. Revenue in the second half was up, at $138.4 million, on the first half's $115.2 million.

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