Pacific Fibre funding round nets $5.5 million

Request for proposals to build second international cable expected late January

Pacific Fibre, the company formed to build a second international fibre-optic cable connecting New Zealand and Australia to the US, has raised more than $5.5 million following its fourth funding round, Pacific Fibre chief executive Mark Rushworth says this is development seed money, and is used for “scaling the team, resource and capability.” The company, which is based in Auckland and has an office in Sydney, has six staff and two further employees are set to join this month. The total cost of the cable is expected to be $US 400 million and will be funded from a mix of debt and equity. Rushworth expects to put out a request for proposal to build the cable at the end of January, with a vendor selected by the beginning of the next financial quarter at the latest. “Our intention was to have that (RFP) out prior to Christmas, but we decided we can wait until the end of January. We’ve got a new hire that is coming on board who has significant submarine cable deployment expereience and that expertise was worth waiting for,” he says. Pacific Fibre has begun signing up customers, though Rushworth wouldn’t say who or how many, citing confidentiality agreement.However, he says approximately 80 percent are from Australia. “Obviously the population's in Australia and our business case has always been based on the volume of the Australian market that's helping fund that cable. And it just happens to swing past and pick up four and a half million customers that are here and connect us up to the US.” Last year, Pacific Fibre co-founder Rod Drury told Computerworld he'd like to see some New Zealand government funding because a purely commercial model would see demand heavily weighted in favour of Australian customers, and it’s likely the company would need to be registered outside of New Zealand, possibly in Bermuda. “It would become just another Southern Cross – that would be good for competition up to a point but you can see this as a bit of opportunity to step change our connectivity,” he told Computerworld. But ICT Minister Steven Joyce appeared to rule government funding out and Rushworth confirmed today that Pacific Fibre remains a purely commercial venture. However Rushworth says Pacific Fibre hasn’t closed the door to working with State Owned Enterprise Kordia, who were planning a trans-Tasman cable called Optikor. “It would be a shame to have both cables built, because I would think one of them would have a very difficult case to get off the ground. But if they do it doesn’t impact us, because our business case is based on Australian volume up to the US.” Meanwhile, the company is investigating possible landing sites in either Takapuna or Manukau in Auckland, in Sydney and two possible sites in Los Angeles. He says Pacific Fibre is on track to be operational by mid-2013, when New Zealanders will see a substantial improvement in their internet experience. “Imagine an entry level fibre data plan that gives you say 100 or 200 GB of data a month, at the entry level and then going up to 500GB or 1TB, wouldn’t be beautiful?” Pacific Fibre says all existing external investors contributed to this latest subscription round, as well as being joined by Peter Thiel’s New Zealand investment vehicle Valar Ventures LP.

Thiel, who co-founded and was CEO of PayPal, has previously invested $4 million in online accounting company Xero, which was founded by Pacific Fibre director Rod Drury.

In addition, New Zealand Trade and Enterprise (NZTE) is providing support by contributing to the cost of the feasibility studies evaluating foreign investment. NZTE’s Strategic Investment Fund provides up to $250,000 in matching funding for feasibility studies.

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