Australian telecommunications group Telstra may build its own transpacific high capacity cable in order to break Bermuda-based Southern Cross' grip on the highly profitable link.

New Zealand newspaper the Dominion Post reported yesterday that Telstra was in talks to build a competing cable between Sydney and Hawaii, where it could then link up with other cable suppliers.

"Telstra is the cable company's biggest customer and, with demand for international bandwidth rising because of the increased uptake of broadband, Australian analysts are speculating that it is keen to wrestle control of the cable away from Telecom and fellow shareholders Singtel-Optus and MCI-Verizon," the newspaper said.

Southern Cross laid the cable in 1999 for a cost of $1.3 billion, and it carries about 85 per cent of all internet traffic to and from Australia and New Zealand, the newspaper said, adding that so far it has had revenues of $1.8 billion from its cable, with one analyst expecting it to earn about another US$1 billion in sales over the next ten years, with Telstra buying 70 percent of that capacity.

Telstra refused to comment on the reports of the talks, which first surfaced in October, but some analysts are said to believe it as a bluff designed to pressure Southern Cross into lowering its prices or else persuading the Bermuda-based joint venture to let Telstra buy in.

Telstra spokesman Andrew Maiden indicated Telstra did not intend to be held to ransom by Southern Cross for international bandwidth.

"One certainty which everyone recognises is that the demand for capacity is only going to increase into the future, and Telstra customers can be assured that Telstra will at all times ensure it has the necessary capacity available at competitive prices," he said. "Telstra is always assessing the needs of the business and options for meeting them."