Terria wants FTTN profit sharing with govt

The Federal government will be able to share in any profits generated by the multimillion dollar national fibre-to-the-node (FTTN) network if Terria's bid wins out, with the consortium's chairman revealing that its proposal would see network financed via an equity-debt mix.

"Currently it's a feature of our bid that the Federal government for its up to AU$4.7 billion commitment should be able to take a substantial part as an equity investment," Michael Egan, chairman of the consortium formerly known as G9, Terria, told ZDNet.com.au.

While debt investors lend money which is paid back, equity investors provide funds in return for a part of future profits and a say in how the business will be run.

"We think equity participation would be ideal," Egan said, adding that the government would receive returns, and could divest its share when it wanted.

Being able to hold equity in the network is not a condition of submitting a bid — the government only requires that a return be made on the public money invested. However, equity participation has been on the cards in the past according to Egan. "They've indicated previously that they would be interested in equity involvement," he said.

An equity model will mean structural separation as a matter of course, Egan added.

"As soon as you have a separate company, the fiduciary duty of management and directors is different than if the network was owned by one player," he said, with the management forced to "treat all the access seekers at arms length".

Using the debt-equity funding model will also make the passage of investors' funds transparent, rendering the project more attractive in a tight debt market, according to Egan.

The percentage of equity and debt is still being worked out, the Terria head noted.

"It's not rocket science — you've just got to get the balance right," he concluded.

Telstra declined to comment on whether it favours a fully debt model or a debt-equity mix to finance its bid for the broadband network.