Telstra has finally sold off its remaining fiber access business to emerging telco Uniti for A$140 million (US$106 million).

It ends a years-long saga in which Telstra has repeatedly sought deferments against a government order to either sell or upgrade the assets.

Under the deal, Telstra is to become one of Uniti's retail service providers (RSPs), Uniti announced today.

Telstra will pay A$21.7 million ($16.4 million) in annual fees for continued use of the Velocity network until the customer migration is complete, expected to take 12-15 months.

For its part, Uniti has committed to buying A$7 million ($5.3 million) a year in Telstra backhaul over the next ten years. It will also buy duct and exchange access from Telstra Wholesale.

Velocity is Australia's largest private FTTP network after the NBN, according to Uniti. It passes 68,000 premises and has 55,000 broadband, pay-TV and phone customers in housing estates across the country and in south Brisbane.

The assets are a legacy of Telstra's old fixed-line access business, sold to NBN Co six years ago for A$11 billion ($8.3 billion).

The Velocity networks, which covered housing estates and parts of south Brisbane otherwise poorly served, were exempted from the sale.

But Telstra has been ordered four times by the government to either upgrade the network to NBN minimum standards or to sell them off.

Telstra sought an extension on each occasion, arguing that the required upgrade – to a Layer 2 bitstream service delivering at least a 25Mbit/s downlink – would be extremely costly.

Uniti said it plans to upgrade "a large proportion of Velocity premises" to XGS-PON.

It says the acquisition would increase its number of active premises by around 40% and strengthen its position "as the definitive challenger in the FTTP greenfield housing markets."

Uniti will pay Telstra A$85 million ($64.3 million) up front and pay up to A$55 million ($42 million) after completion of customer migration. It will fund the deal through a A$50 million ($38 million) share offering and a A$50 million increase in its existing debt.

Uniti CEO Michael Simmons said he believed the partnership with Telstra, the largest RSP in the market, was "perhaps the most significant strategic aspect" of the deal.

It would open up a "large universe of presently untapped greenfield property opportunities" in wholesale and in value-added services such as access control, CCTV and perimeter Wi-Fi services, he said.

For fast-growing Uniti, this is its seventh fiber network acquisition since its IPO on the ASX in February last year.

It completed the largest of these, the A$560 million ($423.4 million) purchase of Opticomm, last month after a bidding war.

Related posts:

— Robert Clark, contributing editor, special to Light Reading