Telstra sues NBN Co over AU$11bn deal

Ahead of renegotiations over the AU$11 billion deal, Telstra is suing NBN Co over the perceived value of the agreement.
Written by Josh Taylor, Contributor

Telstra is taking NBN Co to the New South Wales Supreme Court over claims that the government-owned company has wrongly valued the AU$11 billion deal.

After two years of negotiations, NBN Co and Telstra struck a deal in 2011 that would lease Telstra's pit and ducts infrastructure to NBN Co for the rollout of the fibre-to-the-premises National Broadband Network (NBN) and pay Telstra to shift its customers from the copper network over to the NBN.

Although the agreement was signed by the two companies in mid-2011, Telstra shareholders did not approve the deal until the Annual General Meeting in late 2011.

A Telstra spokesperson told ZDNet that it had taken NBN Co to court over when CPI adjustments should start to apply under the agreements.

"We have one take on the contract and NBN Co has another. We have not been able to reach agreement through a long mediation process, so, as provided for in the contract and as the next step, Telstra is asking the court to decide," the spokesperson said.

It is understood that Telstra believes the CPI should have come into effect on January 1, 2012, after the agreement was signed in June 2011. NBN Co believes the CPI should have come into effect from January 1, 2013, because the structural separation undertaking that Telstra was required to submit to the Australian Competition and Consumer Commission (ACCC), outlining how the company will separate its wholesale and retail arms, was not accepted until March 2012.

"The impact to us over the term of the agreement is significant, but not material from a market perspective," the Telstra spokesperson said.

It has been suggested that the difference between the two numbers is approximately AU$100 million.

Although NBN Co and Telstra are about to commence renegotiations for the deal, in light of the change of government and a potential shift in the policy that would require access to Telstra's copper line for a fibre-to-the-node network, Telstra said that the timing had nothing to do with the renegotiations.

"The timing of this action has nothing to do with a renegotiation of the NBN deal, although resolving this disagreement will help provide greater certainty, and as such may assist future policy discussions."

NBN Co had not responded to a request for comment at the time of writing.

The case has been set down for a directions hearing with Justice David Hammerschlag on November 8.

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