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Yes it is different management you will have to get used to but the VOC/AMM assets are still the same and the operational leverage is increased by the combination of MTU assets and sales force.
On this point - I'm looking for utilisation rates on their fibre network, but can't seem to find it. They reported a 76% utilisation rate for data centers in the FY16 1H presentation, but nothing on the network recently.
The most recent I can find is a 14.5% utilisation rate (ridiculously low) in FY15 1H on their australian fibre network. With these assets, they could essentially JUST focus on selling/maintaining the network and really crank up the operational leverage. Pair this with the Monthly Recurring Revenue figures quoted in the recent Investor Presentation in Corporate sales and one can understand why the sales team is increasing by ~35%...
It seems whilst Vocus were building/acquiring their network, they weren't making the most out of it... (or I'm mis-reading something). The M2 team must be licking their lips.
Yep, very long-term this is what will happen. But since there is a big shortage of government funding for vital infrastructure companies like Vocus will keep building additional networks under cities and cable connections under the sea. Once they're built they cost bugger all to maintain. I assume because interest rates are so low they're very easy to finance, and the cheap capital will let these companies ride out the ramp up period until the operational leverage starts kicking in. Also having the retail cash cows from the MTU tie-up will definitely help servicing the balance sheet.The most recent I can find is a 14.5% utilisation rate (ridiculously low) in FY15 1H on their australian fibre network. With these assets, they could essentially JUST focus on selling/maintaining the network and really crank up the operational leverage. Pair this with the Monthly Recurring Revenue figures quoted in the recent Investor Presentation in Corporate sales and one can understand why the sales team is increasing by ~35%...
The big question for me is - since the old Vocus / AMM board members are not going to be as big a part going forward, how does this impact the infrastructure side of the business? I assume they see this as their major growth avenue, especially after doubling down with the NextGen acquisition. Do the MTU board members agree with this or has the focus changed again?
Also good points - there is always the potential for over-stretching their networks.NextGen filled a missing link cheaper than it could be built for. I hope they don't continue to build excessively, Fill the gaps and niches yes but beyond that the chance of building eventual uneconomic infrastructure has got to be high from this point.
Bit of a problem of the commons though because if others continue to build it will still impact margins even if you don't play, but at least you wont have the eventual write offs as well.
Whether it be MTU, AMM or VOC, these guys have always been super-active either building something or buying something. I don't see it as being in their nature to sit on their hands waiting years for their network utilisation to grow (as much as this might be a decent option). Eyes wide open in that respect.
Yep, very long-term this is what will happen. But since there is a big shortage of government funding for vital infrastructure companies like Vocus will keep building additional networks under cities and cable connections under the sea. Once they're built they cost bugger all to maintain. I assume because interest rates are so low they're very easy to finance, and the cheap capital will let these companies ride out the ramp up period until the operational leverage starts kicking in. Also having the retail cash cows from the MTU tie-up will definitely help servicing the balance sheet.
The big question for me is - since the old Vocus / AMM board members are not going to be as big a part going forward, how does this impact the infrastructure side of the business? I assume they see this as their major growth avenue, especially after doubling down with the NextGen acquisition. Do the MTU board members agree with this or has the focus changed again?
Yep - two of the main drivers have now gone though. Hopefully this was the issue!
Thanks! This is essentially my thesis for the infrastructure stuff. It's sad that we live in a world where the Government infrastructure that isn't already finished (NBN) is basically redundant for a lot of corporations. It is what it is I guess.Finally on the private fibre network - I really feel that most underestimate how critical data transfer is becoming. What was initially housed in company-owned Data Centers (DCs) is being farmed out to AWS/Microsoft DCs at an insanely fast pace - the growth in cloud services shows this (see ASZ, DTL, RHP, etc.). The second level impacts then move out to telecommunications and data transfer requirements.
What's more, this gets coupled with software development that evolves quite easily to allow for the increased limits in data transfer, memory availability and load-balancing between multiple sites with ease (basic AWS/Azure JSON templates allow for this).
Of the clients I've worked with, none would even consider putting up with the contention rates proposed by the current NBN pricing (if RSPs are to make a profit, that is). They'll gladly pay up thousands extra to have the right connection - it hits productivity too hard otherwise..
Thanks! This is essentially my thesis for the infrastructure stuff. It's sad that we live in a world where the Government infrastructure that isn't already finished (NBN) is basically redundant for a lot of corporations. It is what it is I guess.
IIRC, the NextGen acquisition was quoted to cost over $1bn in capex, yet they bought it for $800m odd, with roughly $20m options on other projects (Darwin to Port Headland and Perth to Singapore). Seems like a no-brainer if you can wrap it up in the services Vocus offer.
Hi Andy
Welcome aboard. We seem to follow the same group of posters on hotcopper (I post there infrequently as 'vesupria') but I do lurk quite a lot.
Whilst the conversation probably doesn't move nearly as fast over here on ASF, the platform I find is very good for posters who like to make more detailed contributions without having them buried under mountains of speculation / gossip about intra-day movements (the kind that has nothing to do with robust technical analysis).
Anyone else think now is a good time to whilst the price is below 6$?
ASX podcast seem to rate it and it is probably due for a rebound?
David out...
NBN Co boss Bill Morrow telling a senate estimates committee on Tuesday that the current model will be revised next year and CVC prices could drop as low as $10 per unit as data usage ramps up. Retail service providers on the NBN have been paying as high as $17.50 per megabits per second under the current pricing structure.
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