Australia-Japan Cable: Structuring the Project Company Harvard Case Solution & Analysis

Australia-Japan Cable: Structuring the Project Company Case Solution

Project and its characteristics

This case focuses on the importance of a new project under sub-marine cable system, which was likely to be developed in order to expand the advanced telecommunication system in overseas. The targeted countries under the project were theU.S (Off-shore), Japan and Australia (On-shore).

australia japan cable case solution

australia japan cable case solution

John Hibbard was the managing director of Global Wholesale and was considered as the key performer of AJC project. He planned to develop the project during 1997 and wanted to execute the project in early 1999. The project defined the characteristics of sub-marine cable system, which would be usedto construct under the sea and provide telecommunication services to the customers.

The study has revealedthe importance of AJC project for the benefit of each shareholder (Sponsor and Bank in the case), thereforeit must critically evaluate the benefits of the project as well as it shouldprovide the information about the development and characteristics of AJC project.

Characteristics of the AJC project

As AJC project is purely based on the sub-marine system cables therefore,in order to further evaluate the data, the system comprise of physical cables, repeaters as well as transmission whereeach cable will be composed of two or more pairs of optical-fiber. Inthiscase, these fibers can only transmitted into one direction only. In order to access the transmitted data for international linkage, the carrier may transfer the data to the local router (a reception data defines as the Hub).

Repeaters are the devices installed by the cable operators to boost the signals for long distance. In this case, these devices can be very useful to access data into different destinations around the globe. Moreover, theyalso provide ease of use for different service providers connected to the cable owners.

Transmission is the global router under the satellite services. It mainly focuses on the international connections around the world, however the sub-marine project fixed its transmissions under the sea for the safety against the potential threat imposed by pirates, sea grenade or any other damage.

Leasing of Assets

The project company consists of the hub stations and cable laying ships,which are considered as the main operating assets for the company. Therefore,the project would allow to lease the stations to different sponsors of the project involved to execute. Moreover,the project requires to lease the laying ships to overseas asit will expand the marine cable systems with longer distance of coverage.Hence,it is clearly mentioned in the case that the project company leased out its stations and laying ships to different sponsors in order to meet the objective of the proposed project.

Financial Structure of the project

The AJC project seems favorable to the potential and existing sponsors asit provides unique characteristics and can be viable to invest for the long-term. Following are some quantitative data that may help to know about the unique capabilities of the project as compared to other projects.

First, the assets of the project will be financed through 15% equity and 85% of debt,which shows that there can be only limited number of sponsors and other private investors to run the project and also to act as partners among each other.

Debt will be largely financed by the banks and can be further divided into two tranches where two debt providers will receive the preferred shares according to the policies of the project. Over here, the tranches reflect different process to recover. Tranche A will receive pre-sales volume, where the project company will generate estimated sales contributed to the ratio given for Tranche A.

In the case of Tranche B, the revenues will be covered after the pre-sales ratio, which indicates that the volume will be contributed by its future revenues after the maturity for Tranche A. Moreover, this process would attract different debt providers in order to mitigate the risk under the industry analysis.................

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