Thodey sees Telstra value in Coalition NBN

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.

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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

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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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22 comments
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  • What a conumdrum! Assuming labor do not find a Tampa sailing over the horizon, they will most probably be gone in 2013. It appears then FTTN will be king, although those spoilt ones will have FTTH.
    Knowledge Expert
  • Of course Thodey see value, the opposition's plan would appear to be.. it's all too hard, just let Telstra handle it.

    Five steps forward 15 back...!

    Pretty much makes the naysayers who whinged about competition, fairness etc, look even sillier, if that is possible.
    Beta-9f71a
    • Just contemplating that headline - when David Thodey "sees value" in the Coalition's proposal, he means "value for Telstra shareholders", not any merit for the wider community as a whole. An important distinction.

      There's no doubt that Thodey has been clever in structuring the deal to play all the angles. Since Telstra owns the copper network, and since the Coalition FTTN proposal depends utterly on the use of that copper, it puts Thodey and Telstra in an extraordinarily strong bargaining position. One might even say that Telstra has the Coalition by the balls.

      "You want this decaying, clapped out, under-maintained network because your political fortunes depend upon it? Sure! We would have sold it for the scrap value, but now you're desperate, we'll extract a Very Special Price, together with some lovely concessions that favour Telstra immensely."

      All the placating talk about how the deal need not be radically changed is beside the point: until the Coalition inks a new deal, income to Telstra is guaranteed under the existing NBN arrangements.

      What makes anyone believe that Telstra will settle for a deal that is any less lucrative than the one they've got? And for the reasons given above, it will probably be MORE expensive than the current deal. Thodey must be smiling mightily at board meetings these days...
      Gwyntaglaw
  • "we don't want to go through another three years of negotiations."

    So then stop entertaining the notion of doing a deal with the Coalition.
    Jingles-8366c
  • Reading this it seems to me Telstra would get a better deal sticking with the NBN. Thodey is most likely just being diplomatic. With the NBN they get $11 billion plus what ever they can get for the resale of the redundant copper. With a coaltion FTTN patchwork they just get $11 billion. NBN simply make more sense in this regard.
    Hubert Cumberdale
    • Indeed HC.

      The biggest worry imo with the opposition's plan is, however, if Telstra are handed back our comms, handed the already built NBN and then given bucket loads of "subsidies" (which of course aren't wasteful or mismanagement) on top, out of sheer NBN hatred/political ideology. Thus setting back our comms advancement decades.

      According to CitiGroup that's pretty much what the opposition will do and MT has indicated that this is likely too (of course biting his tongue and saying not just Telstra...sigh) which I'm sure Telstra as a company will love, once they have yet another government over a barrel and can negotiate even more subsidies to maintain their own copper, needed for FTTN.

      Although Citi did valued TLS shares at $3.11 per share with the Coalition's (previous) plan and $3.25 with NBNCo (iirc).

      But as citizens we shouldn't care about the value Telstra sees in either plan, we just need to ensure they do not once again own our comms network and dictate to both citizens and governments/GBEs, as they did particularly with the Howard government (thanks Sol), NBNCo and in the future a Coalition government/NBNCo Mk2.
      Beta-9f71a
      • Easy solution to that problem. Make sure you vote Labor.
        figjam12
        • Probably a forlorn exercise, living in a blue ribbon Liberal electorate.

          But I'm hearing you.
          Beta-9f71a
  • Wouldn't be surprised if the "re-negotiation" has already been done. My guess is it will go something along the lines of Telstra "foregoing" some of the original revenue (after contract default payments have been accounted for) in exchange for maintaining control over the copper to the premises. Essentially a shiny new backbone infrastructure handed to Telstra on a platter, and status quo for everyone else.

    Thinking about it, since Telstra got the original infrastructure gifted to them by the taxpayer, I guess nothing's really changed.
    xBeanie
  • Conroy said it best. Of course Telstra would see merit in the Lib's plan, they will get paid twice!
    xfire-db15e
  • If Turnbull wants to speed things maybe the Coalition could alter their policy to have fibre to the premises (FTTP) rather the current FTTH. Run the fibre to each home. So one fibre per block effectively.

    Houses get a direct fibre link. Unit blocks get a bundle to the MDF and then run VSDL over the existing copper to the individual units. This will easily provide the speeds NBN is currently offering as it is already doing 100Mbps full duplex in the labs.

    This is what Japan did when they rolled out their network. This does not require as much access to the unit blocks and therefore much less hassle with Body Corporates / Owners Commissions etc.

    If they bring in enough fibres to the MDF room when they initially rollout they can upgrade the whole block or individual units later without the expense of cutting up the streets again.

    Regards,
    Michael.
    Wmfoster2001
  • Seeing 'value' and 'best option' are not the same.

    The first is about being able to work with it (that is, it doesn't create insurmoutable problems) while the latter is a preference.
    Patanjali
  • Thodey is another Sol. FTTN? Australia has already got FTTN when Telstra embarked on a massive roll-out of ADSL2+ since 2008. The majority that are within the radius of three kilometres from an exchange has already got FTTN services. The few extra DSLAM deploy through FTTN will not add to much. There will be no further improvement in the speed, stability and the quality of service since the FTTN nodes had already been completed. Telstra ulterior motive is to go to bed with the Coalition and reap Australians of eleven billions in another devious scheme. One can be forgiven for being a fool, but Thodey is no fool.

    This is what the current responsible Government and the NBN Co must do. Legislate and revised the agreement such that Telstra will only be paid for each FTTH connection completed. This is to stop anyone from committing fraud.
    Al_bigpond
  • The central issue is a modern telecommunication infrastructure that is future-proof. In optical fibre, no repeater is needed as light pulses can be self-amplified in erbium doped fibre and there is minimum signal loss even at a distance of ten thousand kilometres with a bandwith of forty Gigabits per second. Australia can never keep up in upgrading the copper plant in this modern world. It is already more expansive to do so as compare with the FTTH roll-out. FTTH roll-out is definitely cheaper than copper wire in Greenfields. Soon, no one will make the VDSL2/ADSL2+ equipments as the whole world is moving towards FTTH. In fact, it is difficult to find information on Alcatel-Lucent ISAM-7302 that Telstra used for ADSL2+ in its web-site now.

    FTTH can be build as a complete open-access. That is, no more monopoly and oligopoly of any dominant telco or ISP. Anyone can participate. Anyone can package and sell an idea on the FTTH super-corridor. That is what the telcos and ISPs fear.
    Al_bigpond
  • Shareholders value? They all say that like a parrot all the time. For the very few Australians who owned ten thousands shares, the dividend that you can get is negligible compared to the value that you can get from a pervasive FTTH built out. Most of the profit is transferred to big institution investors overseas through the Global Fraud Machine. Paul used to said: 'I make Malcolm rich'. He was referring to the millions he made after the Treasurer opened up the superannuation industry. Apparently, that is still not enough. Now is: 'I See Dollar Now' (ISDN) in FTTN. It is like I got extra few millions transferred into my account when I do FTTN to destroy FTTH.

    For those who keep harping on the cost benefit analysis, Australia lost over eight hundred billion in the capital markets in just a few months around October 2008 or about forty per cent. This was reflected in the accounts of all those who hold superannuation. That is enough to roll-out FTTH to every home, build a MAGLEV high-speed rail network to cover the whole of Australia with plenty of spare change.

    Telecom Australia build the current telecommunication infrastructure. The ducts, the conduits, the copper cables, the exchanges belong to all Australians - the real stakeholders since they paid for it through the telephone bills over many years. The previous custodians must have been paid to float this utility. Therefore there is no need to pay Telstra eleven billions if it did not do the hard work to build the infrastructure in the first place. The high cost of electricity. Three hundred dollars for water per month for just two people! Who benefit? Where does the money go to? What shareholder value did you get?
    Al_bigpond
  • Get used to it, this is what will happen, although not quite like some here see it. For those who want FTTH, then any telco will be allowed to roll it out to your home - users pays, as it should be. It won't be a Telstra monopoly on the last KM, it will be competitive.
    PhilCommerford
    • LOL... Phil sounds like Frergers...

      Oh please, LMFAO...
      Beta-9f71a
    • "users pays"

      The NBN is user pays.

      The cost of rolling out fibre to each of the 12 million premises is IIRC ~$4000. So I promise to pay my share for the construction of the NBN in 80 monthly installments of at least $50. To sweeten the deal I am willing to continue paying at least $50 a month for the rest of my life for this connection. Sound fair?
      Hubert Cumberdale
  • Forgive me for revisiting this subject. It is my understanding that a FTTN, means equipment installed in the street next to a Telstra cable distribution point. The connection from the fibre to the premise would use the copper. Being a very small distance the connection speed lost is limited. In the major cities this method maybe a faster method to roll out an NBN?
    Knowledge Expert
    • http://news.theage.com.au/breaking-news-national/fibretokerb-nbn-could-cost-more-20111025-1mhr7.html

      http://www.dbcde.gov.au/__data/assets/pdf_file/0007/110014/Summary_observations_for_website.pdf

      Refer Observations 1.2 paragraph 8
      Beta-9f71a