PPC-1 Cable Project Takes Off

PIPE Networks Limited (ASX:PWK)  announced on 14 January 2008 it has signed sufficient contracts with keystone customers for the Board to approve the construction of a 6,900km, $A200m undersea cable system linking Sydney, Australia to the communications hub of Guam with a spur connecting Madang, Papua New Guinea, referred to as PPC-1.

Representing a significant enhancement to Australia’s international broadband capacity, the main trunk of the PPC-1 cable system will be a 2-pair fibre cable capable of delivering 1.92 Terabits of data per second.

Speaking from the 2008 Pacific Telecommunications Council conference in Hawaii, PIPE Networks Managing Director and CEO, Bevan Slattery said this was an exciting new international business for the Company which expands on our core business of being an independent network infrastructure builder, owner and operator.

“PIPE Networks has a strong track record of building profitable and competitive telecommunications infrastructure in response to market demand.  Sure this is a large piece of infrastructure, but it is vital to break the stranglehold the Gang-of-Four have on capacity into Australia.  PPC-1 will be the first submarine cable into Australia that will actually provide cost effective high speed connectivity to enable business and consumers to access increasing bandwidth required to engage in the global information revolution,” Mr Slattery said.

Foundation customers who can be identified at this time include VSNL, Telikom PNG, iiNet, Internode and Primus. Other domestic and international customer contracts and counterparties cannot be disclosed due to confidentiality restrictions.

Mr Slattery said, “Foundation customers of PPC-1 are the real champions of competition.  “These customers are leading the drive for change.  They wanted a change from the same old overpriced bandwidth product available for the past 8 years.  We all realised that this is the last chance to break the Gang-of-Four’s stranglehold on international capacity pricing into Australia.  All Australians will benefit from their vision and belief that the days  of paying too much money for too little bandwidth had to end.”

iiNet CEO Michael Malone agreed.  “This is a significant announcement for all Australian Internet users,” he said.  “iiNet has been saying for years that the bottleneck in Internet access in this country is in the international links, not in the access network. This project signals the first entirely new cable delivered to Australia in eight years and will deliver more capacity for bandwidth-starved Australians.” PPC-1 is predominantly aimed at providing more bandwidth capacity for Australia.

The PPC-1 cable system will include branching units outside Sydney and the Gold Coast to allow the connection of future projects, along with a spur into Madang, Papua New Guinea.

Mr Slattery said PIPE Networks had been working with Telikom PNG for quite some time. “We realised that our project and service offering could be a unique opportunity to provide important bandwidth for the northern areas of PNG, particularly for the development of broadband and other important applications such as telemedicine.

Telikom is very committed to working on delivering  a better communications infrastructure for the residents of PNG and their participation in PPC-1 has been a testament to that.”

In accordance with the Company’s investment philosophy, the Board is satisfied that, with direct investment along with these customer contracts, it anticipates that the PPC-1 cable project will achieve positive cash recovery of the investment within 3-5 years.  The Company expects that the cable ownership vehicle is expected to be debt free within 6 months, following commissioning of PPC-1 (scheduled for the second quarter of 2009).