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Vocus signs $58.5m deal for Southern Cross Cable capacity

​Vocus is set to increase its capacity on the undersea cable connecting Australia and New Zealand with the United States by 10 percent, after entering a $58.5 million purchase program deal for the extra capacity.
Written by Leon Spencer, Contributor

Australian telecommunications provider Vocus Communications is forking out $58.5 million (AU$74.7 million) to increase its capacity on the Southern Cross Cable, which connects Australia and New Zealand to the United States.

The Sydney-headquartered company, which is publicly listed on the Australian Securities Exchange, told investors on Thursday that the purchase program it had entered into for the additional capacity on the cable will increase its capacity by almost 10 times when fully allocated.

The company hopes that the extra capacity will enable it to meet the "rapid growth in internet data demand" that it is currently facing.

"This significant increase in capacity enables Vocus to continue to leverage the high growth in data demand from the wholesale and enterprise sectors," Vocus CEO James Spenceley told investors in a statement (PDF). "Given its redundant and protected nature, Southern Cross capacity is a valuable asset and a key differentiator for Vocus."

The capacity to be purchased in the deal will be for the life of the cable, which is currently projected to November 2030.

Vocus said that in contrast to previous upfront capacity purchases, this latest deal will see capacity allocated and paid in annual instalments over a six-year period, beginning in December this year.

As a result, the asset and liability relating to the purchases will be recognised incrementally as capacity is allocated, instead of upfront, the company said.

"The favourable structure of the new agreement aligns the asset, liability, and amortisation to expected use," said Spenceley.

The extra capacity purchase follows an agreement earlier this month worth AU$23.5 million to acquire two datacentres from local disaster recovery company Enterprise Data Corporation (EDC).

In December last year, the company announced its intention to acquire the remainder of Amcom Telecommunications in a deal that will see Vocus snap up the remaining 90 percent of its former rival. Vocus had previously taken a 10 percent stake in the Perth-based Amcom in October 2014.

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