Vocus offloads Kiwi network construction unit

ASX-listed data centre and communications company Vocus today said it had divested its New Zealand network construction division to form a new joint venture with the country's telco incumbent Spark.

Under the deal, Vocus will sell its construction unit into the new Connect 8 joint venture, and Spark will buy half of the JV for a cash payment.

Both Vocus and Spark will also commit to an agreed level of annual spend for the joint venture.

Neither company has said how much the deal is worth, but Vocus expects Connect 8 to have annual revenue of NZ$15 million to NZ$17 million (A$14.2 million to A$16.1 million).

In a statement to the Australian Stock Exchange, Vocus chief executive James Spenceley said Connect 8 was set up to ensure stable earnings for the network provider.

While the construction division has generated revenue of around NZ$11 million (A$10.3 million) and earnings of NZ$3 million (A$2.85 million), it has experienced what Vocus termed "significant volatility from period to period."

"The Connect 8 joint venture and its committed pipeline will help mitigate earnings volatility from the construction division, providing Vocus with a stable earnings profile, while maintaining access to its industry experience and substantial construction intellectual property," Spenceley said.

Spark chief operating officer David Havercroft said the joint venture would help the telco deliver fibre-optic connectivity to business customers, as part of its platform-as-a-service strategy.

Spark spun off its network infrastructure arm Chorus - at the time named Telecom New Zealand - in 2011. The relationship between the two ASX-listed companies has soured in later years, as Chorus wholesale price increases put it at loggerheads with Spark.

Vocus inherited the construction division when it bought New Zealand backbone network operator FX Networks last year for A$107 million.