Pacific Fibre – Part Two

This just in – some answers to some questions I had for the Pacific Fibre crew:

How much will it cost?

Under $900m. We have received a VROM (very rough order of magnitude quote) but are waiting for further quotes which we believe will be for less. As the process goes forward the quotes get tighter, but more expensive to produce

Who is doing this?

Aside from the founders we are talking to other big investors and customers, but it is very early stages at the moment. I’m impressed at the interest we are receiving though. The way these work is that we need to sign up early customers before we can lock in money, which is tough as the biggest players have their own cables.

It’s a bit of a chicken and egg thing but we know that the demand overall will be there to deliver and our early contacts are very promising. The key for customers is to sign up, regardless of what competitors counter-offer (and they will), so that we can guarantee a competitive market in the long run.

What return will it provide?

We will have equity and different types of debt – the yield on each varies as the risk profile varies. The more solid debt will be backed by customer orders and give high grade debt-like returns. The equity is much more at risk, and really dependent on the speed of the rising tide of demand. Our aim is to generate good returns for investors while achieving our mandate of high speed uncapped internet at affordable prices in Australasia.

As an aside this is an interesting move for those involved. For Drury it is a reasonably high-risk initiative. he’s obviously very ambitious and those ambitions extend well beyond Xero (witness his NZX directorship). If Pacific Fibre takes off it could be the launch pad that propels him to the next big thing.

For Morgan and Tindall it’s much more philanthropic, and they undoubtedly bring a discipline that balances Drury’s exuberance.

Rushworth brings telco experience and marketing nous to the organization, while Wiggs and Humphrey are there to do the work (as an aside I for one am going to watch Wiggs, more usually the high level adviser, get involved in nitty gritty – it’ll do you good to get your hands dirty lance 😉 )

More interesting to see will be which large organizations buy in to this (financially or otherwise). The telcos, central government and other large businesses that have the cash and wherewithal to get involved will position themselves in the weeks to come – watch this space.