Southern Cross Cable slashes wholesale prices by 44% after progress by Chinese rivals; Kordia denies management deal

19 Jan 2012

The Southern Cross Cable Network, New Zealand’s only international submarine cable, has confirmed that it has cut wholesale prices by as much as 44%. The news came just hours after Chinese firm Axin Ltd revealed that work on its own independent submarine cable has progressed significantly, following the signing of a ‘multi-million dollar’ marine survey contract with affiliate company Huawei Marine. Southern Cross marketing director Ross Pfeffer told that his company had cut the price for carrying traffic between the United States and New Zealand and Australia by 44%, with trans-Tasman tariffs slashed by between 22% and 41%. In addition, the price of carrying traffic between Hawaii and the US has dropped by 22%. When quizzed on the timing of his announcement, Pfeffer dismissed it as ‘totally coincidental’.

Hours earlier Axin (an affiliate of Shanghai Communications Services, itself a 51%-owned subsidiary of China Telecom) and Huawei Marine (a joint venture between Chinese telecommunications equipment giant Huawei and Britain’s Global Marine Systems) confirmed the signing of a contract for a comprehensive marine survey, which is required before construction can start on its proposed submarine cable; Axin referred to the development as a ‘critical element of the project’. The Chinese-backed consortium estimates that its submarine cable deployment will cost around USD100 million; when deployed, the cable will compete with Southern Cross – as well as the planned Pacific Fibre cable – to route trans-Tasman internet traffic. Axin’s project is expected to be completed in early 2013, ahead of Pacific Fibre, which is not expected to launch until 2014. Pacific Fibre chief executive Mark Rushworth recently admitted that his company’s efforts to fund its deployment were taking longer than expected, with the CEO saying that the process was ‘a bit like herding cats’.

Finally, with regards to China-based speculation that New Zealand’s state-owned transmission company Kordia had officially been selected to manage the network on Axin’s behalf, the Kiwi firm commented: ‘To clarify, Kordia has collaborated with Axin on various aspects of this project over time but has not signed a commercial agreement to operate the cable’. Kordia was forced to issue the denial after a brief statement was issued to the Chinese media earlier this week, indicating that Axin’s cable will be called ‘Optikor’, the name that Kordia had previously given to its own initiative to build a trans-Tasman cable – a plan which it mothballed in September 2011, following Axin’s initial announcement.

New Zealand, Kordia, Southern Cross Cable Network (SCCN)