By RICHARD BRADDELL
WELLINGTON - Downer Group, the incoming owner of Telecom's design, build and maintenance group ConnecTel, intends to use its new subsidiary's telecommunications expertise to expand its footprint in Australia.
The purchase was announced yesterday and takes effect on June 1. While the price was not revealed, Downer's managing director,
Stephen Gillies, said it was in the tens of millions rather than the hundreds of millions of dollars.
ConnecTel's share of Telecom's infrastructure business has dwindled to around 40 per cent, but it still remains New Zealand's largest telecommunications infrastructure company, with 800 employees and a turnover of about $140 million a year.
While ConnecTel is not as profitable as in the past, Mr Gillies said, the debt-free company was still making a return of around 20 per cent on investment.
The Australian-listed Downer Group's New Zealand operations include Downer Construction, Century Resources and Works Infrastructure. Earlier this year Works took over BP New Zealand's Bitumix road-sealing company.
In Australia, Downer is active in engineering, infrastructure and mining and has been keen to expand its footprint into the rapidly growing telecommunications industry.
While a ConnecTel free of Telecom's ownership will chase contracts such as those flowing from the $1.1 billion Telstra Saturn network rollout, ConnecTel will also provide a solid core of expertise to underpin Downer's expansion from roading infrastructure to telecommunications in Australia.
The big prize is business from Telstra, which is following in Telecom's footsteps by making its ConnecTel equivalent, NDC, fight for business against competition from outside companies.
Mr Gillies said Telstra's ultimate goal was to spin off the entire activity in about two years' time in the same way as Telecom had sold ConnecTel.
Beside NDC's $A2.5 billion annual turnover, ConnecTel's $140 million is tiny.
But although Downer is likely to export human resources expertise from ConnecTel, half its 800 employees will technically remain on Telecom's payroll and work on secondment to ConnecTel.
Mr Gillies said the arrangement was "a bit sensitive," but implied it was a legacy of ConnecTel's separation from Telecom two years ago.
Engineers' union assistant national secretary Andrew Little said the arrangement arose from ConnecTel employee resistance to individual contracts when the collective agreement expired two years ago.
The agreement, the terms of which had been rolled over, had more generous redundancy provisions - probably worth between $20,000 and $25,000 - and was triggered if ConnecTel was sold.
