Telstra signs on for pan-Australia fiber network

Australian Communications Minister Stephen Conroy has managed a real, tangible win-win outcome with Sunday's deal between Telstra and the National Broadband Network Company (NBN Co), according to telecommunications analysts.

Sunday, Telstra revealed it had signed a preliminary AU$11 billion (US$9.73 billion) deal with NBN Co that would see the telco migrate its telephone and broadband customers onto the fibre National Broadband Network, with its copper network to be shut down and no more broadband services to be provided over its hybrid-fibre coaxial cable network.

It was a day many thought might not ever come, but did: a day Telstra agreed on a way forward.

What was agreed was non-binding and ultimately up to Telstra's shareholders to approve. Though with a large jump in the company's share price today, analysts say there's hope in securing the votes the company needs when taking the deal to the market early next year.

Analysts also say it's an agreement likely to benefit the telecommunications giant in the long run.

"What a way to retire the copper network; somebody actually [leases] it from them. Unbelievable! How many other carriers around the world have somebody [pay for] a dying asset? That's a big positive for them as well," said Gartner analyst Geoff Johnson.

Johnson said Gartner's take-away from the announcement was that Telstra would now get a "war chest" of cash to go and market its retail service offering.

As for the government's side of the deal, he said it got the political response it wanted.

Apart from the potential AU$11 billion Telstra could get from the deal, it is also getting more certainty, according to Ovum analyst David Kennedy. The company now knows what compensation it will receive for retiring its copper network and has an idea of its migration strategy to the next-generation fibre network, he said.

"The benefits that Telstra has been able to achieve are considerable," Kennedy said.

The "big achievement" for the Federal Government, Kennedy said, was that "Telstra would not, under this agreement, be a competitor to the NBN Co in the future", which he said was a "very important" achievement.

Had Telstra decided it wanted to compete, Kennedy believed the telco could have "quite effectively" done that for a long time. "And what this means for NBN Co is that they won't have to face that scenario," he said.

As a result, NBN Co would now be able to break even "significantly earlier" if the deal goes through.

IDC analyst David Cannon said the deal would allow Telstra to consolidate its operational back-end. "There'll be huge cost savings and efficiencies from an operational perspective as the [old] networks get decommissioned," Cannon said.

"But at the same time, they've got a great price on what they're agreeing to do and they also get regulatory certainty in a long-term sense as a result as well, which was probably the biggest inhibitor of Telstra's share price."

He believed the deal would be "a great opportunity" for Telstra's share price to "get up to those highs that we saw about 10 years ago", but said this was a long way off yet.

This article was first posted in ZDNet Australia.