NBN docs: Telstra deal or no deal details

The summary of the National Broadband Network (NBN) business plan released today laid out two costing scenarios for an NBN build: one where Telstra goes ahead with the $11 billion financial Heads of Agreement, and one where the planned deal falls apart.

The summary of the National Broadband Network (NBN) business plan released today laid out two costing scenarios for an NBN build: one where Telstra goes ahead with the $11 billion financial Heads of Agreement, and one where the planned deal falls apart.

The Telstra deal with NBN Co will bring down the total capital expenditure required for the National Broadband Network to $35.7 billion from $37.4 billion, the documents said.

"Taxpayers benefit from the deal with Telstra because it reduces the overall cost of building the network and will result in higher take-up rates and revenue for NBN Co," the document stated.

"It also means that a greater proportion of the NBN roll-out will be underground, with less overhead cabling. It would mean Australia's largest telecommunications company, Telstra, will become a participant in the roll-out of the NBN. Telstra will become NBN Co's largest suppliers of infrastructure and is likely to become NBN Co's largest customer."

NBN Co said it expects to complete negotiations with Telstra in December this year on the Heads of Agreement. The agreement will see the telco's copper network shut down, its ducts leased to NBN Co and its customers transferred onto the NBN.

However, the full NBN Co business case has a extensive analysis of a "no deal" situation, according to the summary.

The summary document lists some potential outcomes of such a scenario:

  • There would be a delay in the completion of the NBN due to network design changes for components such as fibre-access network sites, transit backhaul and points of interconnection locations.
  • The up-front incentives for people to migrate to the NBN would have to be doubled because Telstra customers would not automatically be transferred.
  • Capital expenditure for connections to the NBN will be lower under the no-deal arrangement because less customers are transferring to the network, however the lower number of customers will impact on the long-term profitability of the network.

While Telstra shareholders are expected to vote on the deal in the middle of next year, it is unclear whether the deal will be accepted. A number of shareholders used the company's annual general meeting in Melbourne last week to voice their disapproval of the agreement made between the telco and the government.

Turnbull was not impressed by the document, saying that it did not prove that the Telstra deal was a good move.

"It's difficult to work out, therefore, why they think the Telstra deal is a good one. You can only assume that while the Telstra deal is going to save them only about $1.7 billion ... on capex, it's going to save them a lot more in terms of reducing their operating losses," he told Fairfax radio.

"But how would you know? This business case summary is wholly inadequate. It doesn't include a profit and loss statement, it doesn't include a cash flow statement, it doesn't include any balance sheets," he added. "If you went along with a document as breezy as this to a bank, with fifty grand to upgrade your café, you'd be chucked out."

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