Subsea networks cornerstone of Telstra’s regional spread

When it comes to submarine cables Telstra is in the box seat.

A subsea cable laying crew in Sydney.

Telstra’s terrestrial networks may have come under pressure in recent months but the telco is steadily fortifying its presence on the one front that holds the key to its international aspirations.

As the internet becomes crucial to our lives, the business of staying connected is underpinned by a vast, interconnected network of fibre-optic cables that run across the ocean floors. These subsea cable networks are the data transmission highways that connect continents and in Telstra’s case quite possibly the path to it becoming a serious player in Asia.

The telco currently operates the largest intra-Asia subsea network and Telstra’s head of international operations and services, Darrin Webb, said the subsea networks are the cornerstone of its international business. Mr Webb says the 400,000 or so kilometres of cable at Telstra’s disposal represents about 30 per cent of active capacity in the region.

“You can almost call it the heart and lungs of our aspirations as a technology business, as we look to overlay software services on top of network services in the region,” Mr Webb said.

The latest addition to Telstra underwater network is the Tasman Global Access submarine cable system, designed specifically to improve connectivity between Australia and New Zealand and strengthen New Zealand’s links with Asian market.

The $US70 million ($92.5m) project — a joint venture between Telstra, Spark NZ and Vodafone NZ — is expected to be ready for service later this year.

Originally slated for completion in late 2014 the TGA project has had a longer than expected incubation period, especially after Telstra reduced its investment in the cable in December 2014.

The telco may have downsized its stake but Mr Webb said that switching the TGA cable on will have a dramatic impact on trans-Tasman connectivity and the project will form a small but important cog in boosting Telstra’s regional proposition.

Revenue from international operations for Telstra jumped 55 per cent to $1.7 billion in fiscal 2016 and the crown jewel for Telstra has been Pacnet, the owner of the world’s largest private submarine cable network.

The telco bought Pacnet in 2015 for $US700m and the acquisition has been the single most important deal for the telco in recent history. While the market has taken a dim view on Telstra’s growth prospects in Asia, particularly in the consumer-facing services, its core connectivity pitch to enterprises in the region is gaining traction.

“Picking up that business has been very important and combining Pacnet and Telstra’s networks has allowed us to add more scale and offer services to meet the demand of international customers,” Mr Webb said

With Telstra set to spend an extra $3 billion over three years on enhancing its network capabilities, Mr Webb is hopeful that some of the capital will be earmarked for international infrastructure.

“The specifics of the extra spend haven’t been documented in detail but we do have a commitment from management that there will be continued investment in international connectivity,” he said. “Over 30 per cent of internet traffic runs on Telstra’s infrastructure right around Asia Pacific and it’s a position we want to build on.”

Telstra is working with Singtel and submarine cable builder SubPartners on APX-West Perth to Singapore subsea cable system.