Ann: Updated FY2019 Earnings Guidance, page-11

Interesting wording of the announcement.

There is a couple of things to point out, SLC say that they were still negotiating terms of the agreement hence why EBITDA was down,

New Accounting Standard
The new accounting standard implemented in H1 2019 requires IRU revenue to be evenly spread evenly over the contract life.

Previous accounting standard required half the revenue to be recognized in when the IRU money received and the rest spread out of the remaining life of the contract.

The new accounting standard means that IRU deals have lesser effect straight away to EBITDA line of the P+L . Cashflow line in the P+L is not impacted by new Standard. Due to this, the deal SLC are trying work through is unlikely to be an IRU type contract.

The only other deal to the affect the EBITDA line of the P+L is an Asset Sale that is not an IRU. i.e SLC have built some assets for an customer and SLC gets a chunk of Cash for it which would be a capital sale hitting the EBITDA line straight away. This was done recently with the new Southern Cross Cable system beach manhole in Sydney. where SLC built the asset in exchange for 100 GBPS capacity on the existing cable.

SLC statement Said "The Company notes that throughout the financial year it has continued, and expects tocontinue, to monetise its extensive Asia Pacific assets in a number of ways including longterm indefeasible rights of use agreements, whereby the cash is often received upfront, butrevenue recognised over the life of the contract"

As per the new accounting standard revenue form these deal would have limited affect on EBITDA lines on the P+L this half. Due to recognizing the revenue evenly over the contract life. As before the Cashflow line of the P+L would be unchanged.