AAPT signs AU$100m deal with Macquarie

AAPT has announced its first major customer deal since acquiring wholesale network provider Powertel in May, extending its relationship with hosting company Macquarie Telecom in an agreement worth AU$100 million a year.

The deal is an extension of a strategic relationship between Powertel and Macquarie Telecom which has run for some seven years.

The agreement will see AAPT provide Macquarie with a wider range of fixed line voice and data services to resell to its business customers.

AAPT CEO Paul Broad told ZDNet Australia that Powertel has had a "long and deep" alliance with Macquarie Telecom. While Macquarie buys wholesale network services from a number of carriers, Broad said the new alliance will see AAPT "gain a greater share of that business".

Under this new alliance, he said, Macquarie will up its spend on AAPT/Powertel services from AU$35 million to AU$100 million a year.

"[Macquarie Telecom CEO] David [Tudehope] and I are referring to this as our alliance part two," Broad said.

More than just reselling each other's services, he said, AAPT and Macquarie Telecom are "trying to integrate the businesses more than we did in the past."

The deal is welcome news for AAPT, which has been struggling to gain market share or maintain healthy margins in recent years. For the 12 months to July 2007, the Australian business of Telecom NZ -- consisting mostly of AAPT -- reported a loss of AU$26 million on revenues that had decreased three per cent on the prior year.

Broad, who founded Powertel and was appointed as AAPT CEO after the two firms merged in May, says his initial focus as leader of the merged entity is on cutting costs.

"I am absolutely committed to addressing costs and improving margins," he said. "The main reason Powertel was acquired was to control costs."

Broad said he and his management team was still in the midst of "making some significant changes to get the value out of putting these businesses together."

These changes are focused around moving more of AAPT's business onto Powertel infrastructure, and finding ways to serve AAPT's consumer customers in a more streamlined fashion.

"Every year AAPT spends about AU$800 million with third parties like Telstra and Optus," Broad said. "But the merged company can now cover 60 percent of that traffic ourselves within the footprint we now own. We are looking to get a significant amount of those services on-net, to create the value the investors saw when they came on board with us."

In order to do this, Broad said, the company has had to evaluate its product lines, bringing those usually sold via resale agreements across onto the network infrastructure gained via the Powertel acquisition.

"We then need to integrate them with the provisioning, billing and selling engines of AAPT," he said.

Part of the challenge, Broad said, is around changing mindsets within AAPT, a company which "always saw themselves as a reseller".

Broad's other great challenge is invigorating the company's consumer business. The merged entity has been working on a scalable back-office system, which will allow consumers to deal with the carrier online in a streamlined fashion.

"Not many telcos in Australia have followed the banks and invested in customer self-service," Broad said. "But with skinny margins and very robust competition in the market, we have to think that way."