NBN ISPs welcome $11 billion Telstra deal but warn of uncertainty

ISPs taking part in the Tasmanian NBN have welcomed the Government’s deal with Telstra (ASX:TLS) but warned some dangers still lurk in the details.

On June 20, the Government and Telstra agreed to a non-binding financial heads of agreement to move customers and infrastructure to the National Broadband Network in exchange for $11 billion worth of value.

iPrimus CEO, Ravi Bhatia, said while the deal was a major step forward, the need for shareholder approval was a major hurdle. He also warned that giving the former monopoly a large sum of cash could greatly imbalance the market.

“What I ask for is that the Government makes sure the money is not used for anti-competitive purposes,” he said. “This is like winning the lotto, except it’s an $11bn lotto.”

But Bhatia’s biggest fear was that Telstra’s Hybrid Fibre-Coaxial (HFC) network, which is used to provide pay TV services, would not be disbanded and could give the telco a major advantage over rivals.

“We’ve just learnt of the deal in a very superficial manner and the details are not yet know but that was a surprise,” he said. “The oversight is very hard to explain… it could lead to political and commercial game playing.”

However, Bhatia was pleased the deal would reduce the uncertainty that loomed over the NBN and claimed it would speed up iPrimus’ move onto the nationalised fibre network.

iiNet’s chief regulatory officer, Steve Dalby, said the concept of providing Telstra with large amounts of money in exchange for infrastructure was fair, but he would wait to see more details before praising its value.

“We’ve really got to put our trust in NBN Co that they’ve struck a deal that is done for the purpose of providing NBN services to Australians and that it’s been done for a reasonable rate,” he said. “It’s not going to be an easy thing for Telstra to migrate its customers – we shouldn’t think they’re getting a Government grant for $11bn without any pain.

“It’s not necessarily a big win for Telstra, it’s more about them getting back in the game after they dealt themselves out… it’s a fairly significant move forward in terms of the relationship with the Government but overall it’s more subtle.”

Dalby agreed with Bhatia in saying that Telstra’s shareholders would be fearful of jumping on board a deal with so few details and that predictions of a share hike were premature.

“It’s more a public expression of good will. It’s a sign of things to come, but it’s got a long way to go. Anybody who’s had Telstra shares over the past five years is probably a little disappointed with its performance,” he said.

Dalby also said the Opposition’s negative stance toward the deal was not productive and that it needed a much better argument to justify voting against it.

“The NBN is a fairly positive step for Australia. For the Federal Opposition to be opposing the NBN unqualified seems to be a flat world view,” he said. “It’s very disappointing to hear an unqualified rejection.”

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