Fairfax NZ eyes vertical integration with ISP venture

Fairfax New Zealand, which is looking to stitch up a merger with rival NZME [NZX: NZM], is looking to extend its business beyond content provision with a new venture to launch a fibre-only internet service provider.

Dubbed Stuff Fibre, the ISP plans to launch in the next three months, offering uncapped ultrafast broadband with a 100 megabit download speed. The holding company, NZ Fibre Communications, is 51% owned by Fairfax New Zealand, and 49% owned by Giant Management, a vehicle housing stakes owned by the ISP's management including former Vodafone executives Sam Morse, David Chapman-Smith, Geoff D'Audney, Robert Tihanyi and former Sky Network Television manager John Simmons.

Morse, who's leading the venture, told BusinessDesk the ISP will be a different proposition from existing telecommunications retailers in that it will only offer services over fibre with unlimited data without having to deal with systems or products related to the ageing copper network.

"It's a really good opportunity to get in here," Morse said.

A Chorus spokesman confirmed the ISP had signed up to buy wholesale access from the network operator.

Stuff Fibre's Auckland-based call centre would be co-located with Fairfax, though Morse declined to say how large the team would be, citing commercial sensitivity.

"We think our partner is very supportive, and we've certainly got enough funding to make sure we can get ourselves going and fund ourselves for a period of time," he said. "What we've been pleasantly surprised by is how efficient the operating model is."

Mr Morse is joined on the Stuff Fibre board by Mr Simmons, Fairfax NZ chief executive Simon Tong and marketing director Campbell Mitchell.

Internet New Zealand welcomed the addition of a new entrant to the market, though deputy chief executive Andrew Cushen was wary if the ISP intended using bundled content as a way to stand out from rivals: a suggestion denied by a Fairfax spokeswoman, who said there was "absolutely no intention of limiting content".

The move comes with Fairfax seeking regulatory approval to merge with its biggest New Zealand news rival NZME.

Also before competition regulators is a proposed tie-up between Vodafone New Zealand and Sky TV, while Spark New Zealand has launched an online video streaming service, Lightbox. At the same time, the telecommunications sector is going through a period of consolidation. Recent deals include mobile phone carrier Two Degrees Mobile buying ISP provider Snap and Australia's M2 Group acquiring CallPlus and later merging with Vocus Communications.

Fairfax and NZME claim they can't compete in digital advertising against the likes of online competitors Google and Facebook without combining their resources and that audiences and advertisers are agnostic as to the platform they use to get information. Both companies have adopted a 'digital first' strategy, prioritising online editorial and advertising over their traditional print businesses.

Among issues the commission has said it will look at include whether there are separate digital and print media markets and whether there's much overlap in online advertising and the supply of news and entertainment via Fairfax's stuff.co.nz and NZME's nzherald.co.nz websites.

Giant Management is 47 percent owned by Mr Morse, with Mr D'Audney, Mr Chapman-Smith and Mr Simmons each holding 14 percent and Mr Tihanyi 10 percent.

(BusinessDesk)

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