NBN future sealed, exit payout unlikely

Telstra may have secured itself a good deal by coming to definitive agreements with the National Broadband Network Company (NBN Co) and the government, but the signing has secured the future of the NBN.

Telstra may have secured itself a good deal by coming to definitive agreements with the National Broadband Network Company (NBN Co) and the government, but the signing has secured the future of the NBN.

Telecommunications industry expert Paul Budde said that the deal meant that the NBN could speed up its plans to deliver the NBN, and that the future of the network was all but final.

"The Opposition Shadow Minister Malcolm Turnbull has already indicated that he is not going to turn the clock back, but he of course is still planning changes if they would win the next elections," he said.

"It will be difficult for any government to renege on the broadband services that are now starting to emerge in the first release sites around the country."

Under the agreements, Telstra will lease its infrastructure to NBN Co rather than transferring the ownership of the assets. Gartner research vice-president Geoff Johnson said that this was a smart move by Telstra CFO John Stanhope.

"If you have a long-term lease, you retain control of the ownership of it, and in a 40-year period, it's like owning land in Canberra somewhere on a 99-year lease," he said. "You're so close to having all the effects of ownership, but you don't lose control."

Furthermore, Johnson considered that the debate over who should be responsible for delivering the universal service obligation is over, with the government funding the $290 million bill to ensure that Australians have a minimum level of service for standard telephone services, payphone and emergency calls.

"Telstra gets to operate as a clean commercial company without the social obligations as baggage in its planning," he said. "The main thing is that the parties have agreed."

Concerns have been raised over mechanisms in the definitive agreements to provide compensation to Telstra should the roll-out of the NBN slow or halt. Ovum consulting director for Asia-Pacific, Nigel Pugh, said that NBN Co would have had to build 20 per cent for the financial compensation to kick in, and that hitting 20 per cent will be a stretch.

Johnson said that the bulk of the program would occur in years three through six, in terms of volume.

"The first year or two is clearly about setting up and getting production going," he said. "They'd be lucky to have 10 per cent, maybe 15 per cent at the most."

However, he also said that even if there would be some compensation to pay if the current Coalition won office, it is unlikely to be the full $500 million.

"The reality is that this would probably be more $250 to $300 million," he said.

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