Bush broadband firm to get $15.7m boost

Victorian broadband provider Neighbourhood Cable has embarked on a $15.7 million capital raising to upgrade its regional network and services, competing with Telstra in the bush.

Andrew Mulholland, chief financial officer for Neighbourhood Cable, said shareholders had approved two fund-raising-related, linked resolutions at an extraordinary general meeting in Melbourne today, 15 January.

Jointly, the resolutions would allow the firm to raise $15.7 million by issuing 4.75 new shares at two cents each for every ordinary share and for the company's venture capital backer, Telecom Venture Group (TVG), to match that share issue by converting all its own redeemable convertible preference shares to ordinary shares, he said.

'It's a step in the right direction,' he said. 'The rights trading starts tomorrow [Friday 16 January] and completes on 11 February.'

Mulholland said Hong Kong-based TVG would only convert its shares if Neighbourhood Cable succeeded in raising the $15.7 million and vice versa. The funds would enable Neighbourhood Cable to continue various projects in Victoria and bring its cash-flow to break-even status.

He said some $2.2 million would be devoted to the completion of a Hybrid Fibre Coax (HFC) broadband rollout for Geelong in Victoria, which would bring the total number of homes and businesses passed by Neighbourhood Cable's network to 90,000. '[Geelong residents] were getting broadband but only over Telstra's ADSL network,' Mulholland said.

'National penetration is about 4 percent but we believe that when people have the choice, they will choose broadband.'

He likened broadband penetration to the rate of mobile phone adoption. Today's broadband situation was similar to that of mobile phones in about 1992, he said, when mobile phones had been around for a while but were on the brink of a massive surge in popularity. 'There was very limited takeup of mobile phones but from 1994 we saw the market grow very strongly,' Mulholland said.

He said about $1.4 million would be spent on Neighbourhood Cable's proposed VoIP network, which would cover Mildura, Ballarat and Geelong. The firm had been selling VoIP since May 2002 but the offering had recently expanded to include a residential offering, dubbed Chatphone.

'We have been through the first monthly billing cycle. You get 30 cents untimed to Melbourne and 40 cents untimed to Brisbane or Sydney -- we've only been selling it for six weeks or so,' Mulholland said.

Another $3.8 million had been budgeted to help deliver Chatphone to all Neighbourhood Cable's markets, he said. Some $3.5 million would be spent on repaying short term debt and interest and $3.6 million for other business development.

The offer itself had cost about $1.2 million, the company's new prospectus for the share issue stated.