Clear sold to TelstraSaturn
Finally it's official. TelstraSaturn has bought Clear Communications from British Telecom for loose change found down the back of Ziggy's couch. The total deal will be worth $435 million with a down payment of $143 million to be paid now and the rest when "loans payable by Clear to BT of about $270 million [are] refinanced".
It's interesting to see this billed as TelstraSaturn buying Clear, not Telstra. This leaves a toe in the door for Austar, Telstra's partner in New Zealand, even though Austar has already said that by the end of 2004 it's bye-bye New Zealand. The Austar press release points out that Austar's involvement in TelstraSaturn has now been diluted from 50% to only 38%, which also points to the future - will we see an end to the cable TV company's role and perhaps a move by Telstra, which is in bed with BSKyB in the UK, firmly into the Sky TV camp? Watch this space. Austar's spokesman at the press conference, Bruce Meagher, made it clear (arf arf) that Austar wasn't necessarily going to pull out in 2004 but they'd very much like the company to become extremely profitable by then.
Rumour and speculation about Clear being sold have been rife since BT put its hatchet man, Peter Kaliaropoulos, in the top job there in August last year. Kaliaropoulos immediately proclaimed the company would become super profitable (seller speak for deferring maintenance) and he had no intention of selling it whatsoever - a sure sign to the market.
An initial deal to flog Clear to a local consortium fell through earlier this year after BT is reported to have asked for too much money. The current deal hardly seems to make the grade after the amount of money invested in the telco by BT, but there you are. Better out than in. BT is in the toilet financially speaking after extending itself just a tad too far and haemorrhaging money in various oddball deals. While Telstra, Austar and TelstraSaturn as well as Clear all have press statements on their various sites about the deal, BT is still asleep at the wheel, bless its cotton socks.
Still, when BT announced it had bought the remaining 75% of the company from MCI Worldcom, TVNZ and Todd Corporation, it claimed the company had a "net book value of approximately GBP40 million", which roughly equals $120 million, so it hasn't done too badly on that front.
Telstra tells us it has already invested $1 billion in TelstraSaturn on top of the $435 million it's paid for Clear. That's a hefty investment to buy yourself 11% of the market which is, by its own admission, worth only $4 billion at the moment. Telstra does say the market is growing at twice the rate of GDP so it's a long term investment, which can't be a bad thing.
800 face sack in Clear takeover - NZ Herald
A small blip on Telecom radar ... - NZ Herald
Telstra's buy of NZ's Clear to 'create telco challenger' - Sydney Morning Herald
Telecom's interesting week
It's also been an interesting week in Telecom's world, what with the quarterly result coming out and the news that Telecom may have given someone a refund on the JetStream connection because of micro-outages knocking their service around.
Telecom is now pushing its IP.Networking product range as a solution for companies that want to do more than just surf the net with their broadband connection. JetStream it seems is only a "high speed internet access" model after all. Good for email and movie trailers but if you want to conduct business over it, better to buy a different "managed" service.
I went to a Telecom briefing last Friday - really interesting stuff about how the network works and what to expect in the future. It was great to talk to the people at Telecom doing the work - did you know they're actually real people? - and find out about things from their point of view.
The next few years are a transition period for Telecom. It's making the leap to packet-based technology in a big way - everything will be broken down and pushed out in packet form rather than circuit switching the way a lot of it is today. Telecom is also talking about changing the way JetStream and JetStart are billed to help drive the uptake. We can only hope this happens soon - getting a bill that's triple what you expect is a sure fire way of keeping the market small if you ask me.
I'd pay more for guaranteed speed, or pay differently - say by the movie or by the game - for different services. Telecom can see a day when it is caching services offered by overseas providers and offering them in a controlled environment to New Zealand customers. This could seriously rock - finally the ASP (application service provider) market could take off (although I doubt it - we like to own our software, not lease it) and the kinds of content we have access to will increase dramatically.
It's been interesting to see the supposed drop off in broadband take up since Napster was crushed. For all its obvious faults, Napster proved there is a market for digital content and that without it there's not a lot you can do with broadband to justify the price. Always on email, faster games, these are things you can do with JetStart at a set price each month.
Sadly, part of the problem with JetStart is the way Telecom bills the ISPs which resell it. The end user buys a speed capped service with unlimited megabyte downloads. The ISPs, however, still have to pay Telecom for the user's downloads regardless of what they earn from the connection. Some ISPs are complaining that they have to offer JetStart or their customers will simply switch to Telecom's ISP Xtra, and that they are paying through the nose to keep these customers. Others have instigated bandwidth caps on their JetStart services to stop the cost escalating too far.
So how much is too much downloading? JetStream starts off with 400MB per month and works its way up from there.
Overseas, however, the story is quite different. Bear in mind that most traffic goes to the US and that US telcos can offer a much better rate than non-US providers--but they in gigabytes of traffic. Gigabytes. Telecom does seem to want to have it both ways - more users, more take up, more, more, more but it isn't offering cheaper megabytes in the mean time. That will have to change if the customer base is to grow. It's a chicken and egg scenario and I can understand Telecom's reluctance to build services and network if the customers aren't there. They are there, Telecom, really they are.
Telecom and Alcatel have also announced that they're in final negotiations over the building and running of this new IP network. This will be a huge deal as it includes Australia as well as New Zealand infrastructure for Telecom. More on that as it comes to hand, as they say.
New DSL packaging on the cards - IDGNet