European-based broadband services provider chello is set to hand almost all of its Australian operations over to its joint venture partner, Austar United Communications, after failing to fulfil promises of signing up more than 20,000 users by the end of last year.
Recent media reports have speculated that fewer than 1000 subscribers have signed up for the local chello service since its launch in March last year.
A Financial Review report suggested that chello’s move signalled a lack of faith in the broadband services market in Australia, with chello reportedly citing a lack of uptake in the service as a reason for withdrawing from the partnership.
Austar said in a statement it would continue to offer the chello broadband portal and high speed Internet service as part of its offering, however Austar will take over the operational responsibility for the deployment of chello, including network configuration, marketing and sales, limiting chello’s involvement to content and branding.
Originally under the joint venture, Austar was responsible for the last mile network and customer relationship management, while chello provided the backhaul of content via the Internet through a satellite system.
It is expected Austar will now incorporate the joint venture into its broadband division, which will continue to use the chello brand under licence but not the staff or resources.
“After reviewing our operations, chello and Austar have agreed on a more efficient means of offering our broadband service,” said Austar’s Managing Director Dana Strong.
“By reducing duplication and taking advantage of the capacity on the Southern Cross cable, which Austar obtained as part of the acquisition of eisa’s assets, we will be able to reduce costs and improve service quality,” she said.
According to Austar’s head of corporate affairs Bruce Meagher, the cheaper and more efficient means of communication to the US gained by accessing the Southern Cross network was a catalyst in the decision which was made late last year.
“It was a mutual agreement to end the deal,” Meagher said. “We are essentially creating a more efficient structure were we will now take over everything except the portal development and the broader international content.”
Meagher denied chello’s departure would mean any financial effect. “In the short term, the effect will be nertual, there will be cost savings. And in the longer term, we will have departed from the revenue sharing agreement we had with chello, and increase capital as our market base grows with the uptake of broadband,” he said.
Austar said all carriers intending to offer broadband services needed to market their services more effectively to ensure uptake. “Everyone assumed it would take time for broadband networks to develop in Australia,” Meagher said. “But this was not an issue in chello;’s decision. This is why we have stepped up our narrowband offering to offer a platform for users to move across to broadband easily.