Contracts sought on back of VicOne

By PETER GRIFFIN

Telecom's Australian business AAPT is in the final stages of its massive VicOne project and hopes the deal will give it an advantage in bidding for outsourcing contracts in Victoria.

The high-speed network linking more than 3000 Government sites, schools, courts, police stations and hospitals is now largely in place after five years of building. AAPT's contract with the Victorian Government expires in September.

VicOne is the most extensive project AAPT has undertaken and has been well received by the Victorian Government. Users log on for everything from high-speed net access to teleconferencing between schools and telemedicine projects. AAPT provided a central IP-based network, with many of the schools and Government offices accessing it over Telstra's wholesaled digital subscriber line (DSL) fast internet service.

Graham Mitchell, head of AAPT's business and internet divisions, said most schools got at least 1Mbps connectivity over DSL.

With an extensive presence in Victoria, AAPT is keen to become a partner when the Victorian Government outsources its telecommunications needs in a deal expected to be worth hundreds of millions of dollars. The contract is one of several on the table as federal and local governments look to farm out their telecoms needs. The New South Wales Government is also seeking outsourcing partners in another large deal.

Mitchell said a federal Government contract spanning several departments for inbound voice calling was worth A$45-A$50 million ($51-56.5 million) alone.

AAPT faces stiff competition from Telstra and Optus but wants to take advantage of the governments' "multi-vendor" approach to outsourcing - dividing large contracts among several players.

Mitchell said AAPT was in a good position to pick up business, particularly in Victoria. "This year is not so much about revenue growth, it's repositioning the business around cashflow and margins. Anything we do pick up [from Government] is upside for us."

AAPT was chasing contracts among companies in the 100-1000 employee range, Mitchell said. It had "single digit" market share in the business sector.

"The business we're winning is sizeable, and we're not the cheapest. When you have low market share, its easier to achieve growth," he added.

The proliferation of players offering services in the data market had pushed down retail prices for telecoms services. AAPT's strategy was to become a major IP player delivering LAN, WAN data, voice and video services.

"Our strategy is to be infrastructure light. That's different to what our strategy was 18 months ago. We wanted to get the business to a strong cashflow position."

Connectivity on a global scale was possible for customers through AAPT's relationship with virtual network operator iPass. Hutchison's 3G services would add a high-speed mobile data element.

Vicone

AAPT