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Telstra strikes US$9.6bn NBN deal

MIS Australia | June 21, 2010
The federal government and Telstra have moved a step closer to striking a deal that would see the National Broadband Network rolled out faster, while saving billions of dollars in terms of the project's cost.

SYDNEY, 21 JUNE 2010 - The federal government and Telstra have moved a step closer to striking a deal that would see the National Broadband Network rolled out faster, while saving billions of dollars in terms of the project's cost.

In a major breakthrough in protracted negotiations between the government and Australia's largest telco, Telstra will be paid A$9 billion to effectively lease its existing infrastructure to NBN Co - the company that will build and operate the network.

The terms of the lease were not disclosed but sources close to the negotiations told AAP the agreement was for a period much longer than 10 years.

Telstra will also be required to decommission its copper network and cable broadband service, and would progressively migrate broadband customers on its copper and cable networks to NBN Co.

The telco will also be paid A$2 billion in compensation to cover costs associated with regulatory reform of the sector.

The A$11 billion deal is expected to save the government billions in terms of the network's original $43 billion price tag, and see the project completed ahead of its eight-year timetable.

NBN Co chief Mike Quigley said the agreement represented "a significant saving" in terms of the project's ultimate cost by avoiding duplication and making the rollout more efficient.

"It's obviously a good outcome in that regard," he said.

The agreement, signed off in Canberra on Sunday, must first be put to Telstra shareholders.

Telstra chair Catherine Livingstone described the development as a "significant milestone" after a year of what were complex negotiations.

"This agreement reflects a commitment by all parties to reaching a mutually beneficial outcome for Telstra investors, customers, employees and the industry," she said.

Crucially, the deal would allow Telstra to bid for lucrative next generation wireless spectrum which the government had threatened to exclude the telco from if it did not agree to structurally separate its retail and wholesale businesses.

Ms Livingstone said the company had received written confirmation from the prime minister that it would be permitted to bid for the spectrum and that sufficient regulatory certainty would be provided on "a range of matters".

In addition to requiring shareholder approval, there are a range of conditions attached to the agreement, including the passage of legislation surrounding reform of the telco sector and approval from the Australian Competition and Consumer Commission.

"Accordingly, there can be no guarantee at this time that the transaction will progress to completion," Ms Livingstone said.

But Prime Minister Kevin Rudd said he was confident the deal would be ratified.

"Both Telstra, in my discussions with them, and NBN Co, in my discussions with them... are confident this will occur," Mr Rudd said.

 

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