Should the Coalition cancel the National Broadband Network (NBN) if it wins the next federal election in two and a half years, Telstra will not have received a substantial amount of the $11 billion agreement with the government, the telco has admitted.
(Cashmoney II image by Martin Kingsley, CC2.0)
The company announced today that the $11 billion deal with the government to decommission its copper network, lease the ducts to NBN Co and transfer customers onto the NBN was closer to being finalised. This morning investors raised concerns that the deal would be cut short if a coalition government took power and cancelled the NBN project before the promised cash could be picked up by the telco as part of the deal.
Telstra's chief financial officer John Stanhope said that the most difficult factor would be predicting when the next election would be.
"[But] if we talk about an election being three years out, in the first three years, the cash flows from the NBN are not going to be great. The cash flow is coming from the infrastructure leasing, they're not going to be doing a hell of a lot of work in the first three years," he said. "And therefore the other element cash flow that's coming to the company that is payment for decommission of customers also won't be very much in the next three years."
CEO David Thodey, when questioned as to whether it would be pertinent to present shareholders with two versions of the deal — the Labor version: a structural separation and a move to the NBN; or the Coalition's version: structural separation with no NBN — he said he would only go with the government deal as it stands.
"What we will take to shareholders is what we have certainty about," Thodey said. "While I may understand the policies of the Opposition Party, they're not in place and so it would be very hard to get any certainty. We're taking to our shareholders what we know."
Thodey said the negotiations took into account possible government changes over the next two decades.
"In any contract or negotiation like this which goes over 20 years, you need to look at many contingencies about change in technology, change in politics ... so we have within all of this, considerations for that," he said. "All that is covered within the negotiations."
The Telstra chief said that the deal took into account scenarios such as a future coalition government cancelling the NBN after some of its customers had already been transferred onto the new network.