Telstra inks Definitive Agreements for NBN participation

7 Mar 2012

Australian fixed line incumbent Telstra has announced that it has finalised its Definitive Agreements with NBN Co and the government related to its participation in the rollout of the National Broadband Network (NBN). The announcement comes just a few weeks after news late last month that the Australian Competition and Consumer Commission (ACCC) had accepted a revised Structural Separation Undertaking (SSU) put forward by Telstra. The telco’s chief executive officer, David Thodey, confirmed that with the finalisation of the Definitive Agreements, the SSU had also come into force, with the executive noting: ‘The Minister has made decisions that enable Telstra to retain ownership of our hybrid fibre-coaxial (HFC) network and our share in FOXTEL, which along with ACCC approval of the final Migration Plan, were pre-conditions to the SSU coming into force.’ Commenting on the long road to reaching a final deal, Mr Thodey added: ‘Today we have concluded almost three years of intense and complex negotiations, with multiple parties, and we are very pleased we have delivered this positive outcome for our customers, employees and shareholders.’

The deal with NBN Co, coupled with associated government policy commitments, are expected to ‘provide Telstra approximately AUD11 billion (USD11.67 billion) in post-tax present value over the long-term life of the agreements’. The telco has also claimed that the agreements will contribute to free cashflow generated in the medium term, in addition to providing Telstra with ‘greater financial flexibility and a stronger balance sheet’. The Minister for Broadband, Communications and the Digital Economy, Stephen Conroy, noted that with the Definitive Agreements coming into force, the state will pay the cash component of the Financial Heads of Agreement, valued at AUD190 million post-tax net present value (NPV); the minister noted that this is part of the originally agreed value of approximately AUD11 billion. Further, Mr Conroy confirmed that the agreements between the Commonwealth and Telstra include a AUD100 million retraining agreement, which will provide the latter funding to assist in the retraining and redeployment of its staff affected by the reforms. Finally, with the deals heralding the start of the full network rollout by NBN Co, it was confirmed that the public-private company, in conjunction with industry players, will undertake a public education campaign to inform consumers about the progressive migration of services from Telstra’s copper-based infrastructure to the in-deployment fibre-optic network. On the back of the developments, NBN Co’s three-year rollout plan is now expected to be unveiled in the coming weeks.