Telstra's NBN finish line

The political uncertainty in Canberra is just the tonic the telco needed to get its structural separation split across the line and the regulator's tick is now all that stands betweeen Telstra and its billions.

There is a certain irony in the fact that the man who launched the national broadband network (NBN) and completely destabilised Telstra – Kevin Rudd – should have played a role in getting the company’s $11 billion deal with NBN Co and the federal government almost across the line.

The finalisation of that deal had been delayed mainly by the Australian Competition and Consumer Commission’s (ACCC) decision to hold an inquiry into the declaration of wholesale ADSL and the prices and terms on which Telstra supplies ADSL services to its competitors.

Earlier this month the ACCC did make an interim declaration of the services and set indicative prices that Goldman Sachs has estimated could strip between $50 million and $60 million a year from Telstra’s earnings before interest, tax, depreciation and amortisation.

Telstra could have challenged the decision but that would have taken time and Rudd’s decision to resign as Foreign Minister and gear up to challenge Julia Gillard made it imperative that Telstra locked in the deal with NBN Co and the government just in case the political landscape changes again.

Until its structural separation undertaking is accepted by the ACCC there is no deal with NBN Co and the government and therefore a question mark, although perhaps a remote one, over the $11 billion of net present value – tens of billions of nominal dollars – Telstra will receive over the next several decades as the NBN progressively displaced its copper network and its customers are transferred across to the new fibre network.

The degree of uncertainty and instability in Canberra, and the possibility, again perhaps remote, of an early election as one of the outcomes from the confrontation between Rudd and Gillard has added a new but incalculable threat to a deal that Telstra and its shareholders now are desperately keen to finalise.

While it was probable that Telstra would accept the ACCC position on the basis that the prospective loss of revenue from the declaration wasn’t sufficiently material to risk losing the wider deal, the developments over the past few days would have crystallised its thinking and underscored the necessity to get the deal done quickly.

Telstra lodged its revised structural separation undertaking with the ACCC last week, whose approval is now the only significant condition precedent to finalisation of the agreements between Telstra and NBN Co.

The ACCC has said publicly that it won’t consult any further with the industry and indicated that it will deal with the revised undertakings promptly, perhaps as early as next week, after which it would go to cabinet for final approval.

Neither Rudd – who with Stephen Conroy, dreamed up the entire concept of the NBN on a plane as they were on their way to announce the embarrassing failure of their ‘request for tender’ process to create a much-less ambitious (and expensive) broadband network – nor Gillard would be likely to do anything to frustrate the deal between Telstra and NBN Co.

The remaining threats could be a decision by Rudd, if he loses a leadership challenge badly, to quit parliament and force a by-election. While Rudd has indicated that he is happy to go back to the back bench, nothing can be ruled out at this point. The other scenario is that an unlikely victory for Rudd sparks a revolt by the independents and strip Labor of its ability to govern.

Telstra and NBN Co will be urging the ACCC and the government to move as quickly as they can to dispel any uncertainties and finally clear the way for NBN Co to begin accelerating its roll-out and for Telstra to start collecting its torrents of NBN Co cash.