Telstra cautious on cutting new deal amid NBN shake-up

Telstra says it was happy to work with the national broadband network, but any new broadband deal with the Coalition government must not deliver adverse outcomes to the telco heavyweight.
By · 24 Sep 2013
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24 Sep 2013
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Telstra says it was happy to work with the national broadband network, but any new broadband deal with the Coalition government must not deliver adverse outcomes to the telco heavyweight.

The comments by Telstra chief David Thodey come at a critical juncture for the NBN project, which is facing a top-level overhaul of its executive and boardroom ranks. This shake-up, revealed by Fairfax Media, could significantly change the direction of Australia's biggest infrastructure project.

"We, as a company ... made the decision that for $11 billion we were willing to let the government take over and we would move on to other things," Mr Thodey told a retail shareholder meeting on Monday.

"That was based on compensation that [Telstra] agreed to take," Mr Thodey said. The complicated deal between the former Labor government and Telstra saw billions of dollars in disconnection payments and infrastructure access payments paid to the telco carrier in return for access to its infrastructure.

The payments were also conditional on Telstra becoming a pure retailer only.

Mr Thodey said he was "agnostic" about the right technology for broadband. "It's the government's decision, not mine," he said.

"I'm moving on. We've got to move this company forward, not being pulled back here every four years and to another change ... it's [the government's] responsibility."

In the retail shareholder meeting in Melbourne, chief financial officer Andy Penn named the NBN as one of the key risks facing Telstra in the next two to five years, but said the company was heartened by the Coalition's promise to keep Telstra shareholders "whole" - that is, not disadvantage them under a new deal. Mr Thodey on Monday declined to be drawn on the respective benefits of Labor's NBN project when stacked up against the Coalition's broadband policy.

Fairfax Media on Monday revealed that the board of NBN Co had offered to resign en masse, given they do not have the confidence of the new government.

But new Communications Minister Malcolm Turnbull has long criticised the performance of NBN Co, criticising cost blowouts and timetable delays, and describing chairwoman Siobhan McKenna has having "no experience" in the telecoms sector. The resignations were offered following a board meeting last Friday.

Mr Turnbull is shortly expected to name former Telstra boss Ziggy Switkowski as NBN Co executive chairman as well as several new appointments.

Separately, Telstra confirmed it has started testing fibre-to-the-node and so-called vectoring technologies at a secret location on its network. The tests were being conducted with equipment provider Alcatel-Lucent, which has been one of Telstra's suppliers for years and has been involved in fibre-to-the-node rollouts in Europe.

Questioned on whether Telstra would continue to offer 28¢ fully franked dividends, Mr Penn declined to comment, saying dividends would depend on future earnings. "In the long term, the company's aspiration is obviously to continue to increase the dividend to shareholders, but to do that we've got to increase earnings per share," Mr Penn said.

Several years ago, Labor threatened structural separation of Telstra, the forced divestment of Telstra's stake in pay TV group Foxtel, and forbidding Telstra from bidding for further spectrum to force Telstra into negotiating the NBN deal.

Labor has argued that without the so-called gun to Telstra's head, the Coalition will start negotiations with Telstra in a weaker position.
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