AAPT to push ahead with fibre network upgrade

Telecom NZ has decided to push ahead with an upgrade of AAPT's national fibre network, to help the soon-to-be wholesale and business-only carrier compete in an NBN world.

Telecom chief Paul Reynolds told financial analysts today that "best capacity, lowest price deployment [was] absolutely vital" for its Australian business to enable it to "compete and work effectively in the NBN world that's emerging over the ditch."

"We've got one of the best fibre networks in Australia and so we're upgrading it," he said.

AAPT first flagged its plans to upgrade capacity on national transmission links in September of last year.

A spokesman for AAPT told iTnews that the first phase of that project - a coastal link upgrade between Brisbane, Sydney and Melbourne - was now completed.

"It means we can deliver considerably more capacity over our optical fibre: 70 Gbps between Sydney and Melbourne and 60 Gbps between Sydney and Brisbane," the spokesman said.

"We expect to have our inland (through Tamworth, Orange, Dubbo, Armidale and up to Brisbane) and eastern upgrades (through Melbourne, Adelaide, Perth) completed before Christmas."

Keeping earnings

Reynolds said the "vast bulk" of AAPT's profits and earnings before interest, taxes, depreciation and amortisation (EBITDA) came from its wholesale and business divisions.

"We're very strong in wholesale and business," Reynolds said.

"Consumer is the one that we're less strong at."

AAPT has sold its consumer division to ISP iiNet for $60 million, pending approval by iiNet shareholders.

There was still a "bit of work" left for Telecom to determine the net impact of the sale on AAPT's future earnings capacity. The company was unable to put a percentage on how much consumer contributed to earnings compared to the wholesale and business divisions.

Reynolds said AAPT continues to make improvements to its wholesale and business divisions. 

The company recently launched a self service portal for its wholesale customers "that helps them access the network and services in a zero-touch way at low cost."

He also flagged the launch of a new session initiated protocol (SIP) voice service.

"We'll have [that] in the market in the year ahead," he said.

Billing systems

The company also forecasts the ongoing rationalisation of AAPT's billing systems to wrap up next year, which would see the consolidation of 14 systems into one.

"That's a level of simplicity that every telco on the planet is trying to get to and the guys [at AAPT] have got there," Reynolds said.

"Changing out systems is one of the hardest things to do in telecommunications."

Finances

AAPT reported a 15.6 percent drop in operating revenues for the full year 2010 to $882 million.

Revenue fell "in all main categories, with the exception of data", which was up 3.1 percent "primarily in the wholesale channel".

The impact of the revenue decline on margin "was mitigated through an improved product mix of new business, favourable pricing from third party carriers, the company's ‘on-net’ strategy and a managed reduction in low margin consumer customers," the telco said.

Reynolds praised "good negotiations with Telstra in Australia on price terms" in announcing AAPT's results.

AAPT shaved $126 million from its intercarrier costs, which came in at $455 million for the full year.

AAPT also reported a $14 million drop in labour costs in the full year, "mainly due to lower headcount driven by the transition to an offshore call centre in Manila and other restructuring."