news Diversified contract and industrial group Leighton Holdings has flagged plans to sell its NextGen, Metronode and Infoplex telecommunications and technology businesses, in a move which will move the so-called “non-core” assets off the company’s books and potentially into the arms of another major player in the sector.
The three companies are well-known in Australia’s technology sector and to some degree complementary. Nextgen Networks owns and operates Australia’s second largest long-haul fibre optic network (behind Telstra), spanning over 18,000 kms and connecting capital cities and major regional centres. Through this network, the company claims, Nextgen is one of only three truly national data connectivity service providers. The network was expanded significantly in 2011 connecting Brisbane to Darwin, as a result of Nextgen winning the Regional Backbone Blackspots Program (or RBBP) and Nextgen took up a long term lease on the network. The network offers redundant capacity between key capital cities.
Metronode, according to Leighton, is a datacentre specialist with assets throughout Australia and expertise in next generation data centre design and construction. Metronode currently operates six datacentres in Australia. This includes five “well-established” facilities providing a total of 2.8MW capacity operating at 100% average utilisation and one Generation 2 datacentre in Melbourne opened in July 2012, with 1.5MW capacity expandable to 12.2MW. Three further Generation 2 datacentres are being constructed in Sydney, Illawarra and Perth, with one more in Canberra in the planning phase.
Lastly, Infoplex offers private cloud and managed hosting services. Its services provide “a flexible and cost-effective data storage and retrieval solution” to organisations preferring not to purchase and maintain their own physical IT infrastructure. Infoplex is well positioned to capture the strong forecast growth expected in this segment, the company claims.
In a statement published yesterday, Leighton said: “Following the completion of a detailed strategic review of its telecommunications infrastructure assets, the Board intends to explore a potential divestment of Nextgen Networks, Metronode and Infoplex. The decision is part of the company’s previously announced strategy of recycling capital as these assets are considered non-core.”
Leighton chief executive Hamish Tyrwhitt said that construction, maintenance and field services opportunities in the telecommunications sector remained strong and were not dependent on the ownership of telecommunications assets. “We remain absolutely committed to this sector of the market through our subsidiary brands Visionstream, Silcar (50% owned by Thiess) and John Holland Communications. A divestment of the non-core assets would enable us to continue to provide those services to the telecommunications sector without owning infrastructure,” said Tyrwhitt.
“We have received a number of unsolicited inquiries and Macquarie Capital has been retained with respect to the potential sale process. However, we will not sell these assets unless there is a compelling value creating proposition for our shareholders. We will make further announcements as and when appropriate,” he added.
Oh, wow. Leighton is interested in selling Nextgen Networks. This is a major network asset – one of Australia’s largest fibre rings – and I would expect companies ranging from iiNet, to TPG and possibly Optus to be highly interested in buying it. This has the potential to add significant bulk to one of the major telcos in Australia. Telstra would doubtless be prohibited from buying it due to competition concerns. But perhaps NBN Co might also be interested?
For those that don’t know the history of Nextgen, it’s a fascinating story. As Wikipedia details, the network was originally built during the early years of last decade, when there just wasn’t much fibre in Australia at all, apart from Telstra’s network and a bit of infrastructure owned by Optus. It was initially constructed at a mammoth cost of somewhere close to $850 million. Initially Leighton only owned 15 percent of the company, but it bought the rest in late 2002 for between $20 million and $30 million after Nextgen went into administration. Yes, that’s correct – the infrastructure was written down by $800 million or so, after the floor fell out of the interstate network transit market.
This week, The Australian reported Leighton could be looking to pick up between $600 million and $800 million for the network. Not a bad return on investment if they can get it.