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Downer, Visionstream win $450M of Chorus maintenance contracts

Tuesday 14th May 2019

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Chorus has hired Downer EDI and Cimic Group's Visionstream to maintain its copper and fibre telecommunications network for the next three years at a cost of about $450 million. 

The new contracts cut out Broadspectrum, which along with Downer and Visionstream was one of Chorus's existing maintenance contractors. Under the new framework, Visionstream will cover Auckland and all areas north of Auckland, while Downer gets the rest of New Zealand. The maintenance deals are separate to the ultrafast broadband installation.

Broadspectrum is still a contractor on the first tranche of the UFB build, which finishes this year, and the principal contractor on the UFB2 build, which runs to the end of 2022. 

The new arrangements come as Chorus overhauls its supply chain in response to a critical review of the way it managed the contracting out of most of its network UFB construction and maintenance. 

A MartinJenkins report in April found the model was appropriate to manage unexpected surges in demand and let the service firms scale up or down to meet the required work. However, the risk of migrant exploitation wasn't well-understood by any of the parties, and a Labour Inspectorate investigation discovered widespread issues. 

"These contracts are the first step in moving Chorus beyond the major UFB network build and connect programmes and into an operating model that provides the ongoing experience our customers expect," Chorus general manager of network and field management Andrew Carroll said in a statement. 

"We have chosen partners who we are confident will deliver the right overall results, not just the cheapest option." 

In 2009, Visionstream introduced the sub-contracting model to Chorus before it was carved out of Telecom Corp. The work had previously sat with Downer and Broadspectrum and largely relied on direct employees. 

Chorus said it expects there will be an opportunity for Broadspectrum staff on the maintenance contracts to move to Downer, which will need to hire new workers. 

The shares last traded at $6.28. They have climbed 29 percent so far this year, making them the third-best performance on the S&P/NZX 50 Index. 

(BusinessDesk)

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