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# 106875 1-Aug-2012 23:21
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[Edit: News sources in paragraph]

"Pacific Fibre hoped to rival the Southern Cross Cable Networks' pipe, which is the only link transporting internet traffic in and out of New Zealand. The second cable would bring competition to the market and bring the price of international internet capacity down, Pacific Fibre argued"

"Southern Cross has built up the bandwidth speed on its cable network to 40 gigabits a second from 2.5 Gbps a decade ago, and expects it to increase to 100 Gbps by the end of this year, rising to 400 Gbps in two years"

"Pacific Fibre shut up shop after it failed to attract the $400 million it needed to fund the project, leaving Southern Cross Cable the only international cable network operating in New Zealand"

I am surprised by this failure. I think many others are as well. Not in hindsight, but that is the benefit of hindsight.

Obvious questions:

  • There was no public offer component therefore there was not much discussion of the risks. Was that a mistake in hindsight? 
  • Was the failure plain short sightedness on the part of potential NZ infrastructure investors? 
  • Is this the biggest greenfield capital raising in NZ for many years? I think it is unusual in this regard. 
  • Were there really good reasons for not investing?

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  # 665803 1-Aug-2012 23:27
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I wonder why it didn't look at floating on the sharemarket to get capital. Mum and dad investors have a lot of money to invest at the moment after the finance company fiasco, and the bans are awash with this, which is one reason why interest rates are so low and banks are desperate to lend to people buying houses.

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  # 666101 2-Aug-2012 12:32
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mattwnz: I wonder why it didn't look at floating on the sharemarket to get capital. Mum and dad investors have a lot of money to invest at the moment after the finance company fiasco,.....

I think the answer to that is simply risk. It looks, on the surface like institutional investors did not like the risk/return profile. The numbers didn't stack up and it appears there was so much risk NZ Super, KiwiSaver providers and ACC wouldn’t buy in. If you look at where ACC puts its money it will give some idea for their appetite to start-ups and risk - and its relatively comfortable with risk. That said if the institutions weren’t going to buy in it would be impossible to sell to moms and pops.. And lets face it moms and pops are pretty useless investors – look at how much they threw at the finance companies

 
 
 
 


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  # 666133 2-Aug-2012 12:56
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The business case obviously didn't stack up.... I'm not surprised really, people tend to think this is the end of the world with UFB but in realtiy international costs play a relatively small part.





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  # 666151 2-Aug-2012 13:14
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I had the impression finance company investors were older people dependent on savings income to maintain their lifestyle tempted and lured by promises of high returns made by (formerly) respected news anchors and other public figures. Not mums and dads so much. Terrible thing to invest national savings in - but a particularly bad individual choice for older people given that any blip in consumer spending and employment was always liable to send retail finance to the dump.

Southern Cross cable on the other hand? Sure the return isn't going to be any think like 19%. It's an infrastructure investment which is supposed to deliver a steady low return for a really long time.

zeon: The business case obviously didn't stack up.... I'm not surprised really, people tend to think this is the end of the world with UFB but in realtiy international costs play a relatively small part.

I agree. It's not the end of the world. I care more about the service level to my door right now.

There is a lot of comment about 'risk' and 'business plan' and 'business case' in the media as well.

There is no detail at all on what the big potential investors like super funds perceived those risks to be and what the perceived deficiencies of the business plan were - hence the post.

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# 666168 2-Aug-2012 13:30
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gehenna: http://www.geekzone.co.nz/forums.asp?forumid=49&topicid=106854


I missed that discussion entirely. It is earlier, and in the correct forum as well Laughing

This discussion is redundant I think. I'll go join the existing one. ;  ).

Took me ages to post and format that yesterday due to trying to fight off a 100% CPU Safari bug instead of giving up and restarting. That'll teach me.

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  # 666207 2-Aug-2012 13:54
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gehenna: http://www.geekzone.co.nz/forums.asp?forumid=49&topicid=106854


Please continue this discussion there.

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