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CCC: Telstra bets on change of govt

Competitive Carriers Coalition (CCC) director David Forman reckons Telstra is gambling on a change in government — the only way the rapidly growing NBN Co can be stopped.
Written by Liam Tung, Contributing Writer

Competitive Carriers Coalition (CCC) director David Forman said he believes Telstra is gambling on a change in government — the only way the rapidly growing NBN Co can be stopped.

Telstra may be putting on a friendly face under chief David Thodey and chairperson Catherine Livingstone, but if Telstra competes instead of doing a deal with NBN Co it will mean one thing: bloodshed.

"What's the alternative if Telstra doesn't do a deal? What's emerging over time is that all the cards will be in the hands of NBN Co, because the prices NBN Co plans to charge for access means that it's more than competitive," Forman told ZDNet.com.au today.

But this only holds true if the Rudd Government remains in power. While statistically it is unlikely that the incumbent government loses after a single term, if it does occur, which could be within the year, a better outcome may fall into Telstra's hands.

"[Telstra] have bet everything on a change of government," Forman said in response to Telstra's remarks today that a "significant gap" still existed between it and NBN Co's valuation of the assets under question.

"If there is a change of government, it could make a policy decision to stop it," said Forman.

Indeed, stalling until the next election and gambling that there will be a change in government is the only thing that can stop NBN Co in its tracks.

In the absence of any private sector investment to date, the NBN Co's funding depends entirely on the current government's policy to support it. At present, Finance Minister Lindsay Tanner holds that key, and has used it to unlock around $160 million for the company to use. If NBN Co wants to make any further acquisitions, it will need approval from Tanner.

At last week's Australian Telecommunications User Group conference, when asked by ZDNet.com.au whether a Coalition government would do what the Labor Government did to its $1 billion OPEL scheme — scrap it — Shadow Minister for Communications Tony Smith would not rule out the prospect. "When we announce our policy you will get all the details," he said in response to the question.

Meanwhile, Telstra is publicly retaining its image of openness towards the government and NBN Co, today reiterating that it "remains engaged with the government and the NBN Co to achieve a timely outcome that is in the interests of the company and its investors".

But today's "significant gap" remark by Telstra is feeding the growing sense that it is not actually serious about the negotiations.

Exactly how big that gap is remains the subject of speculation. Goldman Sachs JBWere analyst Christian Guerra has put that difference at around $4 billion. While Telstra can monetise its network for around $8 billion, the cost to rebuild it would be around $12 billion, he reported in December last year.

CCC's Forman reckons the difference between NBN Co and Telstra's valuation is in the tens of billions of dollars because Telstra values its network at around $30 billion.

"This is simply because Telstra has such an inflated sense of its own value," he said. "The longer it goes on, the less chance Telstra has of persuading NBN Co that their numbers can be taken seriously."

The CCC has positioned Telstra's comments as an attempt to gouge taxpayers. "It is clear that NBN Co has refused to pay an inflated price for Telstra's assets, so Telstra has declared it is going to continue to frustrate good policy unless it is paid-off by taxpayers," the group said in a statement today.

Optus has chimed in too, with Maha Krishnapillai, Optus director, government and corporate affairs taking a swipe at Family First Senator Steve Fielding.

"Today's statement makes it clear that Telstra is nowhere near close to striking a deal with NBN Co, despite apparent assurances from Telstra to certain senators that a deal was close," Krishnapillai said in a statement.

"Telstra's successful smokescreen has led to a delay in a vote for the much needed regulatory reform, providing Telstra with a more powerful negotiating position and leaving the rest of the industry, and the Australian consumer, high and dry."

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