Reach drops data customers

The wholesaling venture said in a statement to the market yesterday that the entire data inventory of its Asian submarine cable network would be consumed by its shareholders' forecast requirements.

Reach said that PCCW and Telstra had experienced significant traffic growth in recent years and forecast data capacity requirements were such they would absorb virtually all of the company's existing inventory for the "foreseeable future".

The venture announced, however, that it would continue to provide voice and satellite service to all customers in addition to PCCW and Telstra.

However, it said it has no plans to expand its capacity other than to meet the needs of its shareholders.

"Economic conditions in the wholesale data market have changed in recent years," the parties said. "Under these conditions, Reach could not expect to generate acceptable returns from data sales at anticipated price points if Reach were to invest in additional data capacity for sale to third parties."

Reach assured that there will be no impact to PCCW and Telstra customers whose traffic is carried via the Reach network. It added that existing third party data contracts will also be honoured and Reach will "work closely with its data customers to ensure a managed migration process".

Reach was created by Telstra and PCCW in early 2001 to "exploit synergies and cost efficiencies" between their respective international wholesale businesses.

Reach also announced it was strengthening its voice business with an order to upgrade and expand its voice switches in the US and UK.

"This is the right strategy for Reach as it continues to operate in a market that requires significant restructuring for long term viability and future infrastructure investment."