Australian incumbent Telstra has ironed out a preliminary A$11bn (£6.4bn) deal to open up its network. If the non-binding Financial Heads of Agreement is finalised, Australia will be able to go ahead with its plans for a national superfast broadband…
Australian incumbent Telstra has ironed out a preliminary A$11bn (£6.4bn) deal to open up its network. If the non-binding Financial Heads of Agreement is finalised, Australia will be able to go ahead with its plans for a national superfast broadband network.
The new network, to be called National Broadband Network Co (NBN), will be able to access Telstra’s infrastructure, thus precluding the need for any network duplication. Telstra, for its part, will also be able to move customers from its copper wire and cable networks to the new fibre-optic one. It is with NBN that the preliminary deal has been agreed.
If this deal completes, NBN would pay Telstra some A$11bn (post-tax, net present value) in phased payments in return for the decommissioning of Telstra’s copper network, the transfer of existing Telstra voice and broadband internet customers across to the Australian government’s new fibre-optic National Broadband Network as it is constructed, and the leasing by NBN Co of certain Telstra-owned infrastructure.
Telstra CEO David Thodey promised that the operator would continue to work with the Government and NBN Co on further details required for implementation of these principles, while warning that a “significant amount of work must still be done on many complex issues” such as migration processes, taxation, the future of legacy regulations applying to Telstra and the consequences of any major changes to the NBN rollout schedule.
The Australian government, while not party to the agreement, has confirmed that Telstra will be able to bid for LTE spectrum once the transaction completes. In addition, it would guarantee sufficient regulatory certainty on a range of matters for NBN Co and Telstra to enable the transaction to proceed.
If the negotiation continues to run smoothly, and an independent authority is happy, shareholders could vote on the deal’s completion as soon as H211.
Fitch today commented that while the preliminary deal was positive, it would not change its rating on the company until an agreement was final. “This is a non-binding agreement with NBN Co which remains contingent upon a number of items, including the passage of enabling legislation, Australian Competition and Consumer Commission (ACCC) approval and a successful shareholder vote, which is not likely to occur until the first half of 2011 at the earliest,” said Julian Crush, Senior Director at Fitch’s Asia-Pacific TMT team.
