Telstra Bags $10B Broadband Deal
Telstra announced yesterday that it signed an agreement for a deal, worth an expected A$11 billion (US$9.6 billion), with NBN Co., which is the company set up by the Australian government to build and operate a national FTTP network. (See Australia Unveils $31B FTTP Plan and Quigley Named NBN Chief.)
According to the agreement, NBN Co. will pay Telstra A$9 billion (US$8 billion) for the decommissioning of Telstra's copper network and cable broadband service and for the use of Telstra's infrastructure, including pits, ducts, and backhaul fiber.
In addition, NBN Co. will pay Telstra A$2 billion (US$1.7 billion) to set up a new company to manage this transition and will assume responsibility for Telstra's universal service obligations.
The agreement also includes a commitment from Telstra to migrate its voice and broadband traffic from its copper and cable networks to NBN Co.'s fiber access network as it is rolled out.
Telstra estimates that the agreement with NBN Co. will deliver a post-tax net present value of approximately A$11 billion. NBN Co.'s payments to Telstra would be made as the FTTP network rollout progresses.
Another element of this agreement is that the Australian government has pledged that Telstra will be allowed to bid for spectrum that can be used for Long Term Evolution (LTE) in an upcoming auction. Telstra said in a statement that it had "written confirmation" of this from Australian Prime Minister Kevin Rudd.
The grand FTTP plan
Yesterday's agreement is significant because the fate of Australia's NBN project has hung in the balance for some time, and Telstra's role in the network was not certain. (See Telstra Dumped From FTTx Project, Telstra Puts AU$1B Price on Separation, Telstra Reacts to Split Proposal, and AsiaWatch: Upheaval at Telstra.)
The government plan is for NBN Co. to invest A$43 billion (US$38 billion) over the next eight years to build and operate an FTTP network -- which includes a mix of fiber-to-the-building (FTTB) and fiber-to-the-home (FTTH) deployments -- that will connect 90 percent of Australian homes and businesses with speeds up to 100 Mbit/s on the downstream.
The remaining 10 percent of homes, which would be in remote and rural areas, will be connected by wireless or satellite and receive broadband speeds of up to 12 Mbit/s.
Yesterday's agreement marks a major milestone in Australia's national broadband plan, but it is still subject to approval by the Australian Competition and Consumer Commission (ACCC) as well as Telstra's shareholders. A definitive agreement will be negotiated in the coming months, according to a Telstra statement, which, if finalized, could be put to shareholders in the first half of 2011.
— Michelle Donegan, European Editor, Light Reading Mobile