Telstra strikes €8b NBN agreement

Telstra will migrate its fixed-line infrastructure and customers across to the government’s NBN Co fiber project in a deal worth A$11 billion (€7.79 billion).
 
After nine months of negotiations, Telstra yesterday said it had signed a non-binding Financial Heads of Agreement with NBN Co to “progressively migrate its voice and broadband traffic from its copper and cable networks to NBN Co’s network.”
 
“The transaction, if completed, would deliver to Telstra a post-tax net present value of approximately A$11 billion,” said Telstra.
 
To begin with, the Sydney Morning Herald said Telstra will receive about A$4.5 billion for allowing NBN Co to access its network of ducts, pits and backhaul fiber.
 
A second A$4.5 billion will be paid progressively to Telstra as it decommissions its copper network and migrates its voice and broadband customers onto NBN Co’s fiber network which will reach 90% of the population within eight years.
 
Telstra also stands to reap A$2 billion from cost savings, such as the government re-jigging Telstra’s universal service obligations.
 
 
The A$11 billion package deal is just under the A$12 billion Telstra was reportedly asking, but considerably higher than the A$8 billion maximum NBN Co wanted to pay, said the Australian.
 
“In effect, this is a non-compete wholesale layer agreement between the NBN Co and Telstra,” said research firm Ovum.
 
“Telstra and the NBN Co’s interests are lining up and Telstra’s competitors should be wary.”
 
Telstra said it has also received written confirmation from Prime Minister Kevin Rudd that it will be allowed to bid for LTE spectrum should the NBN Co transaction be completed.
 
Under the agreement, Telstra will also be allowed to keep its HFC network and provide TV-only services over Foxtel in which it owns a 50% stake.
 
Telstra expects to put the proposal to shareholders in the first half of next year.
 
The final agreement will also require Australian Consumer and Competition Commission approval and enabling legislation for the proposed USO changes.
 
Telstra shares opened at A$3.44 on Monday.

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