Dynamic Business Logo
Home Button
Bookmark Button

NBN/Telstra deal unlikely, separate payment possible: Conroy

The National Broadband Network looks likely to go ahead without Telstra, given the lack of savings using Telstra’s existing network would afford the NBN Co.

NBNco DBCDEThe McKinsey and KPMG NBN implementation study concluded that if NBN Co struck a deal with Telstra, it would only be saving $5 billion on the $42.8 billion total cost of the network. Any deal with Telstra is likely to include access to ducts and ‘pits’ to help NBN Co roll out fibre optic cable to homes and businesses.

An NBN Co deal with Telstra would however involve a migration of customers across to the NBN, which would add value to any deal with Telstra, it is difficult to see this making up the shortfall between Telstra’s $12 billion asking price and the $5billion saving in infrastructure costs such a deal would bring. NBN CO’s Mike Quigley was believed to have been prepared to pay up to $8 billion Business Spectator reports, which is consistent with the numbers in the KPMG report.

Telstra may still however come away with a one off payment from the Government with negotiations running in parallel to those with NBN Co for an outright purchase of infrastructure that covers such issues as legislative reform and any compensation payable to Telstra if the telco is forced to structurally separate in order to meet the post NBN competition framework federal communications minister, Senator Stephen Conroy has said to ABC’s Inside Business program on the weekend.

Senator Conroy has gone on to argue that NBN Co, building infrastructure rather than being a commercial telecommunications provider shouldn’t be held to higher commercial return standards than those imposed on Telstra.

“Telstra have made the point themselves; they cannot build a business case to reach 100 per cent of Australians [with a fibre-to-the-home network],” Conroy said. “The best they have said they will be able to do is to reach 60 per cent of Australians. That is five capital cities and a little bit up and down, north and south of Sydney.

“So we have never taken the approach that we need to make the rate of return that the telco sector is used to. This is a project which returns all of the government’s money and interest costs, and makes a modest return of six to seven per cent.” Senator Conroy said.