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Telstra sees 'significant' gap with NBN

March 19, 2010

Telstra says there is a significant gap between it and NBN Co on the proposed financial outcome of the planned national broadband network.

Telstra said the NBN talks, which are focused on the future of Telstra’s fixed local access network and associated matters, were continuing but major differences remained.

The comments came as the federal government shelved debate on the legislation, delaying any vote on a plan to split Telstra until at least May and possibly June.

The postponement may further ease pressure on Telstra shares, which sank to a record low of $2.88 earlier this month before a partial rebound. The shares were little changed in morning trade today, losing as much as 2 cents, or 0.6 per cent, to $3.15.

‘‘Currently there is a significant gap between Telstra and NBN Co on what each party considers to be an acceptable financial outcome, and there are also a range of commercial matters that are yet to be agreed,’’ Telstra said in a statement to the Australian Securities Exchange.

Telstra also was discussing ways in which the gap could be bridged, recognising that the government had highlighted the national interest benefits of the NBN and reform of the telecommunications industry.

Telstra said a range of legislative changes and regulatory approvals would be needed for an agreement to be implemented.

‘‘Telstra remains engaged with the government and NBN Co to achieve a timely outcome that is in the interests of the company and its investors,’’ Telstra said.

‘‘As Telstra has noted, should an in-principle agreement be reached and the Telstra board recommends a significant change to the nature or scale of Telstra’s activities then, subject to the required regulatory approvals, the board intends to seek shareholder approval for the full proposal.’’

Telstra is negotiating with the government and NBN Company, the company charged with rolling out the federal government’s $42 billion high-speed broadband network, on the implementation of the project, which could see some of Telstra’s infrastructure integrated into the network.

The government is committed to breaking up Telstra’s retail and wholesale arms in an effort to introduce greater competition into the telecommunications sector.

The government, short of seven votes in the Senate, abandoned debate on plans to split Telstra until parliament resumes in May, giving the company more time to strike a deal on involvement in the new broadband network.

Telstra worries

Telstra said earlier this month that it was concerned that draft laws that would govern how NBN Co operates and is regulated could create a retailer rather than a wholesale network provider.

The legislation states NBN Co is to be a wholesale-only company but it gives the communications minister significant powers to allow it to conduct retail services.

Telstra has said the draft legislation has raised the prospect of NBN Co becoming a government-funded retailer, not just a wholesale network provider.

Telstra has said such an outcome would run counter to the core purpose of the NBN and the government’s primary policy objective of restructuring the industry to have separate providers for retail and wholesale fixed network services.

The draft laws allow NBN Co to offer services directly to certain end-users and to purchase other communications companies even if they have retail businesses.

This would allow NBN Co to compete directly with retail providers such as Telstra.

Telstra has said that if the draft laws came into force, Telstra would need to factor this into the financial consideration required to achieve an agreement that is in the company’s and its shareholders interests.

AAP, Reuters

8 comments

  • This is simply a re-nationalisation by theft. Governments simply can't be trusted to own and run telecommunications networks. Hopefully, Conroy and his idiot mates will be gone from the treasury benches before they can enrich any more of their labor mates at the expense of the long-suffering shareholders of Telstra. Conroy wants to have his cake and eat it too.

    Commenter
    Screwed Shareholder
    Date and time
    March 19, 2010, 12:35PM

  • Where is ASIC in this ?
    Surely there is some protection for companies and their shareholders from irresponsible governments in the corporations laws?
    Or
    Will the government decide it doesn't like the Commonwealth Bank and decide to open their own in competition?
    Will they also decide that Coles and Woolies have a duopoly on grocery prices and have the government open their own supermarket?

    Commenter
    K
    Location
    Sydney
    Date and time
    March 19, 2010, 12:50PM

  • Governments do what they want. They always have. The UK government re nationalised 2 banks less than 2 years ago. In the 1930's the US government confiscated all privately held gold. Good luck taking them on K.

    Commenter
    Pat
    Location
    Sydney
    Date and time
    March 19, 2010, 1:08PM

  • The Constitution specially gives the Federal Government the power to do what it likes with communications companies. There was a proposed amendment some years ago that would have obliged it to pay compensation for compulsory acquisitions, but we voted against it.

    At least now it's easy to value Telstra as a business - the scrap value of copper, times the weight of the cables, less the price of digging it up.

    Commenter
    Lee
    Location
    Carlton
    Date and time
    March 19, 2010, 1:26PM

  • The ALP will learn a very important lesson tomorrow. Telstra share holder do vote and no sane person would want to spend 38 billion on replacing what we already have. Who really wants this change?

    Commenter
    Joel
    Location
    VIC
    Date and time
    March 19, 2010, 1:25PM

  • Breaking up Telstra is long overdue as they have enjoyed the vast benefit of being a Monopoly, answerable to no-one but themselves.

    Really, what we are seeing here is a consequence of the sheer incompetence of the last government in selling off a monopoly without breaking them up first.
    This leaves the current options as:

    1) Leave things as they are - other Telco's running constant battles with Telstra to get adequate access to cable infrastructure and keeping the ACCC very busy indeed.
    while this is great for Telstra's share holders the lack of competition is not great for Australia as a whole.

    2) set up alternative infrastructure to compete with Telstra on an even footing - in practical terms the Telco market in Australia is simply not big enough to support this option, Cable costs around $300 a meter to bury and re-cabling Australia would cost tens of Billions of dollars - for a market of 20 Million people the return on this sort of investment simply is not there.

    3) Break Telstra up, carve off infrastructure (exchange buildings RIM access etc) and Cable access into one chunk which then provides equal access at equal cost to all Telco's and the other chunk looking after services: telephone switching, DSL etc - OK this one may hurt the shareholders in the short term I am guessing they would need to be reimbursed in some way maybe also issued shares in the new company, but then that potentially defeats the purpose of the break up.

    Really though, Telstra should have been broken up before they were sold but the last Government didn't give a damn about Australia and their sale of Telstra stands out as one of the most incompetent of many incompetent decisions.

    Commenter
    Richard
    Location
    Sydney
    Date and time
    March 19, 2010, 1:48PM

  • As an investor i take responsibility for understanding the risks of any investment i make, so should the whingers to this column for their poor judgement in buying shares in Telstra.
    1. The previous government sold it off in a deal which required debt financing of the level of uplifted dividends. That's dumb and not sustainable. So it is proving.
    2. Telstra's prime assets are their ducts with the copper wire that's in them, and their exchanges,in which by longstanding legislation, others can install their equipment.
    3. Copper wire is obsolete technology.
    4. Customers are switching to wireless or voice over internet phone calls. They want faster internet than copper wiring can deliver.
    Telstra back then was a poor buy at the price.
    The present government don't owe investors compensation for their poor judgement in buying Telstra any more than they do investors in Babcock and Brown.
    As far as NBN is concerned, Australia needs to get optical fibre just as it needed copper wire 50 and 100 years ago.
    Telstra are not motivated to put in optical because they lose monopoly pricing on copper. They will only do as much as they are forced to do. So NBN is in the interest of all Australians and all that is left is a deal that does NOT pay Telstra for an obsolete technology, but does pay for the value to NBN of not having to dig their own ducts, and no more than that.

    Commenter
    GerryJ
    Location
    Abbotsford
    Date and time
    March 19, 2010, 2:30PM

  • Given the high prices from iiNet for Tasmanian fibre (NBN), I don't see any point in continuing the NBN in its current proposed format. Rudd should dump it & go back to the Opel model.

    @ Pat
    The US government was taken to court over the gold confiscation, but because it paid market value (in depreciated US dollars) it was found to still be constitutional. That said, collectors gold items (with certain stamps) were exempt from confiscation. The lesson for Americans is to not have gold in your safe deposit box if the President may invoke his executive powers to confiscate your gold.

    @ Lee
    The government must pay market value for any compulsory acquisitions for any non-government entity or property, otherwise no one (including foreigners) would invest in Australian businesses or shares.

    Commenter
    nbn is a joke
    Location
    Melbourne
    Date and time
    March 19, 2010, 3:55PM
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