Western Power is hoping to recoup some of the heavy losses from its ill-fated foray into the telecommunications sector by selling its Bright Telecommunications venture.
Western Power is hoping to recoup some of the heavy losses from its ill-fated foray into the telecommunications sector by selling its Bright Telecommunications venture.
Listed companies Amcom Telecommunications and People Telecom are believed to have been selected as the preferred bidders for the failed broadband venture, which cost Western Power $23.1 million.
Western Power was one of several energy utilities around Australia that diversified into telecommunications in the late 1990s, in the hope of extracting greater profits from its infrastructure.
The Bright venture involved the installation of a fibre optic cable network in tandem with the installation of underground power cables in the CBD and South Perth, Como and Victoria Park.
The venture attracted only about 300 customers and last August Western Power managing director Tony Iannello announced that it would not continue.
Western Power’s board assessed the disposal value of the Bright assets to be “up to $1 million”, according to a note in its 2004 financial accounts.
“But because the costs associated with an orderly wind-up of operations are anticipated to exceed the sale proceeds, the recoverable amount of these assets has been assessed as zero,” Western Power said.
“Based on this assessment, the directors have written down the assets by $23.1 million to their recoverable amount [of zero].”
In a statement to WA Business News this week, Western Power said it was “continuing with the process of finalising the position of Bright’s business and assets, which include the 300 customers and the under-ground conduit that passes 30,000 premises, by end October 2005”.
The sale process is believed to have been complicated by defining precisely what the bidders can acquire.
Western Power said the 200 kilometres of optic fibre, which it uses for substation and transmission network control, “will continue to be owned by Western Power”.
Therefore, it is understood the successful bidder would either lease or acquire the right to utilise the network for telco services.
Responding to suggestions that Western Power may be having second thoughts about proceeding with the Bright sale, a spokesman said Bright “is not core activity for Western Power”.
This follows comments last August by Mr Iannello, who said: “Quite rightly, our focus should be on our primary business.
“Against this backdrop, Bright cannot be justified in terms of either further capital expenditure or the operational expense.”
For Amcom and People, the Bright assets would complement their existing broadband infrastructure in Perth.
Perth-based Amcom, whose major shareholder is Futuris Corporation, has built an optic fibre network that extends from Joondalup to Rockingham and targets the main commercial districts in between.
Sydney-based People gained a presence in the Perth market in June 2004 when it acquired local company Swiftel, which established a small fibre optic network in the CBD.
In order to offer a broad range of telecommunications services, both companies utilise their fibre optic networks in conjunction with DSL services using Telstra’s copper wire network.
