Spark gives up its majority stake in Southern Cross Cable as Telstra buys in

Spark boss Simon Moutter will still be the biggest dog at the Southern Cross Cable table - but his company will no longer have majority control. Photo / File.

Spark says Telstra is buying into the company that controls the Southern Cross Cable - a move that will see the Kiwi telco's majority stake watered down to a minority holding.

Today, Spark owns 50 per cent Southern Cross Cable, Optus 40 per cent and US telco Verizon 10 per cent.

Subject to regulatory approvals, Telstra will take a 25 per cent stake in the Bermuda-incorporated joint venture for an unknown sum, diluting Spark's holding to 37.5 per cent in the process, depending on final terms.

Beyond Telstra's investment, the Aussie telco has also pledged to become an anchor customer in Southern Cross Cable's planned new trans-Pacific cable, dubbed "SX NEXT."

Spark says it can't comment on the financial impact of the deal until terms are finalised.

Between its commission in 2000 and last year, Southern Cross Cable - which runs between Austalia, NZ and the US - was New Zealand's only major broadband link to the outside world.

That situation changed last year when friendly competition arrived in the form of the Auckland-Sydney Tasman Global Access Cable - a $100m joint venture between Spark, Vodafone and Telstra.

And it the landscape shifted again in the middle of this year as the new trans-Pacific Hawaiki Cable, backed by rich listers Malcolm Dick and Sir Eion Edgar, went live.

That means while international data demand is surging, ISPs and other large organisations operating in the corporate and wholesale markets now have more choice and Spark's dividends from Southern Cross have been under pressure.

Spark recently said it expects its share of Southern Cross earnings to be in the range of $10m to $20m in 2019 against $50m, $61m and $66m in the three prior years.

Forsyth Barr Matt Henry and Matt Dunn say competive pressure and the ageing nature of the Southern Cross Cable are behind the dividend squeeze.

Inviting Telstra to the party will lessen the cap-ex impact of building the new NXT cable (which will likely be around the half-billion dollar mark), but of course the Aussie contender will now want its share of the spoils - and Spark will no longer have the deciding vote as investors weigh the joint venture's future.