Uecomm sells fibre network to WA electricity co.

Uecomm looses $7 million in Fibre sale

Telecommunications carrier Uecomm has agreed to sell its Western Australian fibre network to electricity utility Western Power for AU$5.14 million over three years, making an accounting loss of approximately $7 million before tax.

According to the terms of the agreement, Uecomm will retain ownership of the network's switching equipment, as well as the exclusive right to resell the broadband capacity into the government and enterprise sectors.

The deal will include $3.64 million in and up front amount and deferred payments over three years, and non-cash benefits of $1.5 million. However, Uecomm conceded the deal will lead to an accounting loss of $7 million given the company's initial investment in the network.

"There is a book loss of $7 million, but in return we are getting the exclusive right to sell into our target market," explained Peter Dawson. "It enables us to focus on our sales and marketing efforts in the market, while Western Power takes on the maintanence and future expansion of the network."

Describing the deal as strategic, Dawson said it would enable Uecomm to form an important strategic partnership with the state government, and expand the company's opportunities in that sector.

Western Power spokesperson David Martin said the investment would enable the electricity utility to bring its communication infrastructure in house, and also provide an asset the company could on-sell.

"We intend to use the network to maintain the control of our data networks and operate out own communications, infrastructure," Martin said. "We will also have considerable excess bandwidth to on sell should we want to develop down that track, but we are primarily buying the network for our own usage at this stage."

While the deal awards exclusive reseller rights to Uecomm in the government and corporate sectors for the next three years, Martin said the company would be able to provide wholesale bandwidth to a domestic broadband reseller should the opportunity arise.

"The deal certainly doesn't rule that out," Martin said. "But we are primarily interested in using it to replace our current situation where we are purchasing out infrastructure of a third party, it will pay for itself just in the way we use it ourselves."