SYDNEY, 24 MARCH 2009 - SingTel Optus could control 25 per cent of Australia's $17 billion fixed-line telecommunications market within six years if its bid for the $10 billion-plus national broadband network succeeds.
Estimates from JPMorgan show the country's second-biggest telco could slice 9 percentage points from Telstra's 69 per cent share of the retail and wholesale fixed-line market in that time, changing the landscape of the sector.
Telstra shares have slumped since the telco was excluded from bidding for the NBN on rising expectations the Rudd government will impose punitive regulation on the former monopoly to facilitate the network.
Shareholders received some relief yesterday. Telstra closed 12¢ higher at $3.15 amid speculation that Acacia, one of the two remaining bidders besides Optus, could be the surprise victor when the government announces a decision next month.
However, JPMorgan analyst Laurent Horrut warned yesterday there seemed to be no way Telstra could be reincorporated into the process and that, whichever rival won, Telstra could still face operational separation of its entire local network and backhaul operations from the rest of its businesses.
The Australian Competition and Consumer Commission began proceedings against Telstra last week for alleged "misleading and deceptive conduct", claiming the former monopoly had denied rival phone companies access to key infrastructure in its local network.
"From the government's perspective, if you are putting $5 billion into a network you want to take some kind of guarantee that Telstra will not be able to behave in an anti-competitive manner with the NBN and other wholesale carriers, as recently condemned by the ACCC" said Mr Horrut.
"One guarantee you can take is imposing further operational separation of the company, which means you have an increased level of regulatory monitoring and disclosure of how these services are delivered to wholesale carriers."
Mr Horrut added that legislative and regulatory steps required to roll out an NBN by any party other than Telstra would be "significant and challenging".
Telstra could be expected to fight any attempts at separating its operations.
Under Mr Horrut's estimates, Optus's share of the fixed-line market could leap from about 17 per cent to 25 per cent by 2015, with almost all of that share taken from Telstra.
But Deutsche Bank telecommunications analyst Sameer Chopra doesn't expect the drift from Telstra to be so severe.
He predicted Telstra would lose only about half a million retail fixed lines where the NBN is built by another company and this loss would be progressive until 2015.
"At most we think about 6 per cent of retail revenues would be lost," he said.
He argued that the shift in market share would not be dramatic because it would require another company to significantly increase investment in its retailing capacity to gain the new customers.
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