Thodey sees Telstra value in Coalition NBN

Summary:Telstra CEO David Thodey has reassured shareholders that they will be protected from any risk should the Coalition take government, and has said that he sees value for Telstra in a fibre-to-the-node (FTTN) roll-out.

Telstra CEO David Thodey has reassured shareholders that they will be protected from any risk should the Coalition take government, and has said that he sees value for Telstra in a fibre-to-the-node (FTTN) roll-out.

Telstra today announced that it is expected to have excess cash of $2 to $3 billion over the next three years as a result of the National Broadband Network (NBN) deal. The deal will see Telstra lease its ducts and dark fibre to NBN Co, and receive cash payments as it migrates customers from the copper access network over to the NBN fibre.

Thodey said that during the negotiations with the government and NBN Co, the company focused on protecting shareholders from a range of risks.

"Everything we looked at it was either about protecting or enhancing shareholder value," he said.

He said that with a project of the NBN's scale, and spanning a 10-year period, Telstra had to account for potential changes in policy, technology or a change in government. Part of that was keeping the actual physical network.

"We kept the copper, so that's pretty good," he said.

This portion of the deal has been a particularly sore point for the Coalition, which would need to renegotiate with Telstra in order to get access to the copper network from the node to the premise for an FTTN roll-out.

Shadow Communications Minister Malcolm Turnbull said yesterday that it would be in Telstra's best interest to renegotiate the deal, because the access payments would be received faster under his plan, given that the roll-out itself would be faster.

Thodey indicated that Turnbull's FTTN approach would be of value to Telstra, because, as Turnbull stated, the payments for migration would become payments for access to the copper, and could be delivered quicker.

"It could be a faster roll-out, and should it be a faster roll-out, we would receive the cash earlier. If that's their policy, I have very little concern," he said.

Thodey said there would be some renegotiations, as the lease agreements for the ducts going to the house would no longer be required, and Telstra would need to maintain the copper to the premise. However, the majority of the deal would remain the same under the Coalition.

"It is not significant in the overall structure of the deal.

"I have a contract with NBN Co and with the government that stands. Should they want to renegotiate that contract, my door is always open," he said. He added that without knowing the full details of the coalition policy, he couldn't commit to anything.

Telstra's group managing director of corporate affairs Tony Warren said that a coalition NBN Co would still need access to dark fibre and exchange infrastructure, so there would be no need to "throw the baby out with the bathwater" if there is a change of government.

"That's what we're hoping, because quite frankly we don't want to go through another three years of negotiations."

The $3 billion in cash over the next three years is dependent on NBN Co meeting its roll-out speed targets, but Thodey said that the migration payments are not that significant, with most of the money coming from the infrastructure leasing.

Despite the potential change in government, Thodey said that he is already thinking about what Telstra would do with the copper once the fibre is switched on inside premises. He said that it would depend on how easy it would be to get it out of the ground, and said that the company is considering melting it down for resale.

"[In] some areas, it's easier to grab the copper out of the ducts than others," he said. "We're not a mining company, but there's quite a bit of copper."

Topics: NBN, Broadband, Telcos, Telstra

About

Armed with a degree in Computer Science and a Masters in Journalism, Josh keeps a close eye on the telecommunications industry, the National Broadband Network, and all the goings on in government IT.

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