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Nextgen cable project 18 months behind schedule

James Hutchinson (via AFR) | July 4, 2013
The undersea cable project sold off by Leighton Holdings alongside other telecommunications assets last week is running 18 months behind schedule, fuelling speculation over whether the project will survive amid rivals.

The undersea cable project sold off by Leighton Holdings alongside other telecommunications assets last week is running 18 months behind schedule, fuelling speculation over whether the project will survive amid rivals.

The $300 million Australia-Singapore cable aims to connect Perth, Indonesia and Singapore with a 4800-kilometre undersea cable carrying internet and phone data between the three countries.

But the cable is yet to begin construction, two years after it was first announced in 2011, and timelines for beginning service have slipped from July 2013 to the first quarter of 2015.

Nextgen chief executive Peter McGrath told The Australian Financial Review that construction would only begin once landing permits are granted by the Indonesian government, which have been in negotiation for nearly a year.

"Getting permits in other countries is not a trivial task," he said.

But he said he expected the permits to be awarded within a few months, clearing the way for construction to begin.

The cable project was one of several assets spun out of Leighton Holdings after the company reached an agreement to offload 70 per cent of its Nextgen, Infoplex and Metronode divisions to a Canadian equity fund, Ontario Teachers Pension' Plan, under the Nextgen brand.

It is one of three projects attempting a similar feat, competing with a joint venture between controversial Chinese giant Huawei and UK's Global Marine Systems, as well as SubPartners, founded late last year by former PIPE Networks and NextDC chief executive Bevan Slattery.

But all three are unlikely to be completed.

FIRST FINISHED LIKELY TO BE MOST SUCCESSFUL
James Spenceley, chief executive of telecommunications provider Vocus, said cable projects were "almost all late" but that the project which finished first was likely to be the most successful.

"There's definitely a case for a second cable there, but I don't think there's a case for a third cable," he said. "Whoever gets in the water running first will absolutely capture the opportunity."

The APX West project from SubPartners plans to begin operations by the end of 2014 and is being built by Mr Slattery, who previously built the PPC-1 submarine cable linking Sydney with Guam and the United States while at PIPE Networks.

The SubPartners project uses shared ownership agreements with customers, as opposed to the capacity lease arrangements ASC and other submarine cable projects have traditionally used.

"Bevan has the biggest advantage; he has done this before," said one industry source, who did not wish to be named.

"I think their construction will probably be finished six months ahead of ours, if they construct," said Mr Slattery. "But our offering is completely different to theirs."

But Mr McGrath said ASC's progress put it 18 months ahead of the competition.

 

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