NextDC

About the author:

Author name:

By Nick Harris

Job title:

Senior Analyst

Date posted:

17 December 2013, 7:56 AM

Sectors Covered:

Telecommunications, Technology

NextDC (NXT) has announced a national agreement with Telstra allowing Telstra enterprise, government and business customers to host their equipment across all of NXT's data centres. Further to this, Telstra's Next G IP network will be connected to all NXT Data Centre facilities.

Telstra services in a NXT facility are available immediately in Sydney, Melbourne, Brisbane and Canberra and will be available in Perth from February 2014.

What we think

No changes to our forecasts and view at this stage. As we understand it, this deal is similar to other deals with NXT channel partners. The customer (Telstra) will take rack space as required (on demand), rather than pre-ordering a large amount of space. Rack space is typically more profitable than white space so this is, in our view, a financial positive.

Telstra is likely to be NXT's largest channel partner with hundreds of business development staff around Australia. We think they will become a material customer over time and, importantly, this agreement completes NXT's telecommunications ecosystem.

With the addition of Telstra, NXT now has every Australian telco as a customer. This will be a big draw card for NXT's "interconnected ecosystem", and a further draw card for content providers.

We retain our Add recommendation for NXT and a share price target of A$2.73.

If you are interested in finding out more about NextDC (NXT) please contact your nearest Morgans office.

Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.