Telstra CEO Ziggy Switkowski and Hutchison CEO Kevin Russell announced the signing of a Heads of Agreement to establish a 50/50 enterprise and fund future network development.
Under the agreement, the H3GA radio access network will become the core asset of the joint enterprise. In return for the 50 percent ownership of asset, Telstra will pay Hutchison AU$450 million under a fixed-payment schedule in four instalments, starting November 2004.
The joint enterprise is expected to open opportunities for new revenues for Telstra and H3GA as well as stimulate growth in 3G service uptake and provide significant savings in 3G network construction capital expenditure and operating expenses.
Telstra will launch its 3G services to customers in 2005, utilising the entire H3GA network of more than 2000 base stations covering Sydney, Melbourne, Brisbane, Adelaide and Perth.
Both companies expect to increase the size of the network over the next three years, expanding into Canberra and other regional centres.
Under the agreement, Telstra and Hutchison will each continue to own separate core networks, as well as application and service platforms, and will conduct their retail 3G businesses independently and in competition with each other.
"In light of announcements by Singtel/Optus and Vodafone that they intend to build their own 3G networks, this agreement recognises that the interest of the industry and the nation are best addressed through this type of infrastructure-sharing arrangement," Switkowski said.
However, decisions on network development will be made and funded jointly. The joint enterprise will utilise the existing spectrum holdings of both partners and will operate until the expiry of those spectrum licences in 2017 or later.
Switkowski said the agreement will have no impact on Telstra's capital management program as announced last June 21.
Under the arrangements, both companies will offer a range of competing products and services to customers such as multimedia content in news, sports, information and entertainment; advanced multimedia messaging; high-speed music and video streaming and location-based services providing maps and directories.
The parties have discussed the agreement with the Australian Competition and Consumer Commission (ACCC) and have sought informal clearance. Both Telstra and Hutchison will be offering the next wave of 3G handsets in 2005.