Purchase of additional capacity on Southern Cross Cable

Posted on February 19, 2015

Vocus Communications Limited (ASX: VOC) is pleased to announce that it has entered into a purchase program for additional capacity on the Southern Cross Cable, which connects Australia and New Zealand to the United States.

The program will increase existing capacity by close to 10 times (when fully allocated), ensuring Vocus will continue to meet the rapid growth in Internet data demand.

Notably, in contrast to previous upfront capacity purchases, capacity will be allocated and paid in annual instalments over a six year period commencing December 2015. As a result, the asset and liability relating to these purchases will be recognised incrementally as capacity is allocated instead of upfront.

The total cost of the purchase program is US$58.5 million.

In line with previous purchases, the capacity is for the life of the cable, currently to November 2030.

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

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