Australia will finally get a new high-speed broadband cable to Asia after Vocus Group announced it would build a link between Singapore, Jakarta and Perth.
Vocus said the new cable would have a capacity of 40 terabits a second - 10 times faster than the existing 16-year old cable - making connectivity between Australia and Asia much quicker and reducing delays.
Once the cable is complete in late 2018, it will connect to Vocus' Nextgen Networks, which carries data across Australia.
Chief executive Geoff Horth described the cable as a "very significant building block and a significant extension of our existing fibre network".
"There is a cable in the water today that is at, or near, capacity and subject to a lot of outages," Mr Horth said. Vocus owned 10 per cent of the existing cable but would own 100 per cent of the new cable.
Vocus said on Tuesday it had signed an agreement with Alcatel Submarine Networks to construct the 4600 kilometre Australia Singapore Cable. Construction will cost about $228 million, including civil works and a refund to a Canadian super fund, which Vocus will fund from debt, cash flow and customer pre-payments.
The news boosted the telco's shares, which were at a 12-month low on Monday, by 9¢ to $4.15 on Tuesday morning. Its shares were trading as high at $9.40 earlier in the year before investors worried Vocus would not be able to sustain its growth rate and would struggle to maintain revenue when servicing customers on NBN Co's infrastructure.
Mr Horth said the low share price did not properly reflect Vocus' long-term value.
He said shareholders would see a return from ASC over the life of the cable. A report from TeleGeography estimates the cable will earn Vocus at least $870 million in revenue by 2029, with an expected lifespan until 2043.
The cable has been on the drawing board for years and was initially going to be built by 2013, when Nextgen Networks was owned by Leighton Holdings. In 2013, the Ontario Teacher Pension Plan acquired 70 per cent of Nextgen. Vocus will pay the fund $20 million to compensate it for the preparatory work done by Nextgen before it was acquired by Vocus in June.
"When we acquired Nextgen, we got the project for zero dollars with the provision we would pay Ontario Teacher if it went ahead," Mr Horth said.
The company told the market in a statement that: "ASC was a key strategic consideration in Vocus' decision to purchase Nextgen Networks, as it, in combination with Nextgen's trans-Australian fibre network, creates a fully interconnected, high-capacity fibre network owned by Vocus from the east coast of Australia through to Singapore, with direct connectivity into Indonesia."
The cable will also connect to Indonesian telco XL Axiata Tbk, which owns a fibre network connecting 90 per cent of the Indonesian population.
The existing cable, called SEA-ME-WE_3, was laid in 2000.
