NBN deal clarifies Telstra future

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Australian Broadcasting Corporation

Broadcast: 21/06/2010

Reporter: Alicia Barry

Telstra has signed an $11 billion deal with the Federal Government over the National Broadband Network.


TICKY FULLERTON, PRESENTER: Telstra shares were up today after drawn-out negotiations with the Government finally came to fruition over the National Broadband Network. The $11 billion deal to lease out its fixed-line network provided a shot in the arm for Telstra's shares, which were up 3.5 per cent by the close.

But the deal is far from secure, with each party able to walk away at any time.

Alicia Barry reports.

ALICIA BARRY, REPORTER: Telstra and the Government have finally called a truce in the long battle for control of the National Broadband Network.

DAVID THODEY, CEO, TELSTRA: We believe that this is an important milestone towards getting to that position, but I want to stress it's only a milestone because it's a non-binding financial heads of agreement that sets us on a road to get to a definitive agreement over the next period.

IVOR RIES, HEAD OF RESEARCH, EL&C BAILLIEU: They had a choice of, you know, of doing a deal with the Government and getting on with life or being dismembered by the Government bit by bit.

ALICIA BARRY: If it accepts the deal, Telstra will be paid $9 billion for access to its infrastructure and reap about $2 billion in regulatory concessions. It also means NBN Co. will not waste time and money duplicating a network. Telstra chief David Thodey says shareholders should be pleased with the deal.

DAVID THODEY: I can't stress enough just how complex this set of negotiations have been because we've had to look at commercial issues, what the future of the business would be, what the structure of the industry would be and what would create value for our shareholders.

ALICIA BARRY: Analysts say Telstra will also benefit from new revenue streams.

DAVID KENNEDY, ANALYST, OVUM: There'll be much less focus on their network assets because they'll increasingly be operated by the NBN Co. and more emphasis on the kinds of services that will be provided over that network. So we'll see a Telstra more focused on customer service and content services in the future.

ALICIA BARRY: Telstra will also have the right to bid for next-generation wireless services.

DAVID KENNEDY: What it will mean is that Telstra will remain a very serious competitor in the mobile sector for the foreseeable future.

IVOR RIES: Telstra will still be subject to a whole raft of regulatory controls until the NBN takes over. So certainly, you know, they're not out of the regulatory yoke and, you know, there are other longer-term regulatory issues about how much they're going to have to pay for the new mobile spectrum.

ALICIA BARRY: The market has been sensing a deal was in the making. Telstra shares shot up again to close at a four-month high.

MARK MCDONNELL, ANALYST, BBY: It's difficult to provide a day-to-day commentary on the share price, but quite clearly the response today is that it's a positive announcement

ALICIA BARRY: But analyst Mark McDonnell says investors should not get too excited just yet. The deal still requires regulatory approval and a shareholder vote, which is likely to take place next year after a federal election.

MARK MCDONNELL: So they've hedged their bets around if the Rudd Government is returned they've established a base for continuing to negotiate around the detail. If there's a change of government, then of course they've got the back door exit around any change of policy in a new direction as a non-binding agreement.

ALICIA BARRY: Telstra's involvement in the NBN has been seen as a positive by other players in the sector.

STEVE DARLBY, CHIEF REGULATORY OFFICER, iiNET: Getting as much traffic onto this NBN as possible as soon as possible will benefit everybody, including companies like ourselves.

ALICIA BARRY: The major ratings agencies have also tentatively welcomed the announcement, with Telstra's credit rating so far unchanged.

TICKY FULLERTON: And I'll be talking to Telstra's rival Optus for their response a little later in the show.

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NBN deal clarifies Telstra future

NBN deal clarifies Telstra future

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