Between the lines: Big investment puts Clear in capital shape

By RICHARD BRADDELL

Three years ago, it became apparent that Clear Communications was in deep trouble.

Putting aside the crippling uncertainty of incompatible shareholder aspirations, it looked every bit a company that was caught in the middle, between the big players and those in the niches.

Worse still, whatever profit margins it should have been earning were being demolished by interconnection payments to Telecom. Clear still looks like a company in the middle.

It is no longer the natural alternative to the incumbent, with TelstraSaturn increasingly occupying that space, particularly in the residential market.

But Clear now shows every sign of having made a remarkable comeback, underpinned by a more rational interconnection regime and by the clarity of direction and heavy infrastructure investment that followed British Telecom moving to 100 per cent ownership.

If so, and some of the proof will come when Clear's March year result is published in September, then the $700 million or so that British Telecom has ploughed into Clear might start to look a bit less outlandish.

Superficially at least, Clear's success should be bad news for its chief rival, Telecom.

But Telecom has good reason to take quiet satisfaction since the strategy now being pursued by Clear is very similar to that Telecom is following in Australia through its subsidiaries, TCNZA and AAPT.

The similarities between Clear and Telecom Australia are remarkable.

Both have significant business district infrastructure, both are trying to boost that infrastructure through local loop wireless, with LMDS being a technology common to both, and both are relatively weak in the mobile market. Both are leaders in the implementation of internet protocol, the network workhorse that is increasingly seen as the way of the future.

But there is one difference. AAPT chief executive and Telecom appointee David Bedford still grumbles about high interconnection payments he has to make to Telstra, something that Clear no longer has to worry about.

The remaining parallel is that both Clear and TCNZA/AAPT are focused on large Government and corporate clients for their core business.

Clear's Government clients include Social Welfare, which achieved a world first last year in installing a low-cost internet protocol-based network through a three-way partnership that included Cisco Systems.

Now, Clear has just indicated that it signed a remarkable $160 million of new contracts in the past month.

And while the details have yet to be revealed, it seems that at least one is of a scale locally to be compared with Telecom Australia's $A500 million five-year Commonwealth Bank of Australia contract.

All well and good.

But the question remains - even if Clear is making money, is it in quantities to justify the $700 million spent so far?

For self-centred reasons, Telecom and its investors should be hoping it does, since they have several times that amount at stake in Australia.