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Multi-Billion contracts flying in Optical Network Equipment sector in 2011 already.



January 21, 2011 – Comments (0) | RELATED TICKERS: GLW , AFOP.DL , CIEN

NBN Co awards contracts worth $1.6b for PON equipment

By Stuart Corner
Monday, 17 January 2011 14:17


NBN Co has awarded contracts for passive optical network equipment worth over $1.6 billion to three suppliers - Australian owned Warren & Brown Technologies and multinationals Corning and Prysmian..

Corning has scored the lion's share of the business with a contract for multiple types of equipment worth up to $1.2 billion over five years. Prysmian, a global manufacturer of telecommunications cabling with manufacturing facilities in Dee Why and Liverpool, NSW, has been awarded an equipment contract worth $300 million over five years and Warren & Brown has scored an equipment contract worth up to $110 million over five years to provide the optical distribution frames and sub-racks that will connect NBN Co's equipment to external cabling.

All three have been given initial purchase orders worth about half their total contract value. NBN Co CEO, Mike Quigley, said: "Part of our purchasing strategy is to make a substantial up front purchase commitment to encourage suppliers to invest in their Australian supply chain ramp-up as we head to volume rollout. They can invest with confidence in plant, equipment, recruitment and training to meet the needs of our national project."

Corning will be the initial supplier of aerial cable, providing selected types of splice closures and will jointly supply feeder cables and drop cables which will connect individual user premises to the fibre network. Corning's existing manufacturing facility in Clayton, Melbourne has already supplied fibre optic cable and other equipment to help build NBN Co's first release sites.

NBN Co said it would "work with Corning who will enhance their Australia-based manufacture and assembly capacity to meet the needs of the NBN rollout."

NBN Co has place an initial purchase order of $400 million with Coring and says that more than half of this contract value will be made in Australia. "Corning will invest in additional cable plant and equipment to manufacture specialised ribbon cable and expand its cable sheathing operations as part of a commitment to manufacture a high proportion of its fibre optic cable for NBN Co in Australia," NBN Co said."


Corning will also localise the manufacture of fibre distribution hubs and has committed to a recruitment and training program to ramp-up its Australian operations.

Quigley said: "This deal between NBN Co and Corning achieves a good balance between the more cost-effective sourcing of bulk fibre materials from overseas and encouraging local manufacturing capacity to increase. During 2011 Corning's global manufacturing facilities will meet some of our initial requirements, however by 2012 Corning will transfer manufacture of ribbon cable to Australia as volumes ramp up in 2012."

Rainer Dittrich, managing director of Corning Cable Systems in Australia, said that, as a result of the NBN contract, Corning would invest approximately $25 million in its Clayton, Melbourne facility, related equipment and personnel training and expects to create an additional 300 to 400 jobs at the location.

NBN Co said it would work with Prysmian - a global manufacturer of telecommunications cabling headquartered in Milan which has been contracted to provide underground cabling for the NBN project - to enhance Prysmian's Australian-based manufacture and assembly capacity to meet the needs of the NBN rollout. Prysmian has received an initial $150m purchase order.

"Prysmian will invest in additional cable plant and equipment to manufacture specialised ribbon cable locally and expand its cable sheathing operations as part of a commitment to source approximately 80 percent of the value of its contract with NBN Co in Australia," NBN Co said. "It will also localise the manufacture of all Prysmian's rodent-proof and high-strength cable in Australia."

Quigley said: "Through this deal NBN Co has secured a commitment to increased local manufacturing over a two-year ramping-up period, and to recruitment and training activities to help fulfil the local sourcing requirement."

Prysmian Cables and Systems CEO Llyr Roberts said: "Directly, this contract will also result in new employment in our Dee Why manufacturing facility of up to 50 jobs over the initial five year period. We then expect the flow on employment effect could be as high as 2:1, with extra jobs being created in transport and logistics, training and administration, as well as in businesses with end user applications."

Prysmian said it would bring to Australia for the first time the ability to manufacture high volumes of specialised ribbon fibre optic cables, a move that will require a direct investment in additional plant and equipment of up to $13 million.

Warren & Brown has received an initial purchase order worth $50m. The company has built a research, development and manufacturing facility in Maidstone, north-west Melbourne, and Warren & Brown managing director, Neil Domelow, said: "It was very difficult three years back, when the world economy was heading down, for Steve Normoyle and I to proceed with the $5m upgrade to our facility, but winning this NBN Co contract proves that our belief in the future of telecommunications fibre technology was justified. It is timely also to express our gratitude to the Victorian State Government for its belief in our company vision and the resulting financial assistance to finish our upgrade." 

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