Telstra safeguards against NBN uncertainty

Telstra safeguards against NBN uncertainty

A range of contingencies have been added in the deal between Telstra and NBN Co to ensure the telco would not be sold short if the NBN is scrapped or delayed.

Telstra has set a number of conditions in its $11 billion agreement with NBN Co to ensure its not left in the lurch should the National Broadband Network (NBN) get scrapped or face delays.

The telco and NBN Co signed off on definitive agreements which would see the $11 billion deal to decommission the Telstra copper and HFC networks. A number of Government deals were also struck, including additional funding for Telstra to satisfy its universal service obligation (USO) as the NBN is deployed.

Optus also finalised an $800 million deal with NBN Co today.

Definitive agreements comprises of eight separate documents which provide a framework of Telstra’s participation in the NBN rollout. Deals between NBN Co and Telstra include implementation and interpretation deed, subscriber agreement, infrastructure services agreement and access deed.

“[A] critical element of the deal is the protection we have secured for shareholders and customers under a range of contingencies,” Telstra CEO, David Thodey, said in a media conference call. “… We had a lot to consider as we negotiated the agreement but we relied on a simple principle that Telstra should not be disadvantaged in any changes in policy or the NBN Co Business Plan.

“We’ve attempted to get some independence.”

With the risk of a change of Government during the life of the NBN rollout, these safeguards will be important to ensure NBN Co will still honour the deal that has been signed.

According to arrangements under implementation, if NBN rollout is ceased or is slow, NBN Co will have to compensate Telstra “for being left with a geographically dispersed network”.

The maximum amount of compensation is set at $500 million once NBN Co’s fibre footprint has reached 20 per cent of Australian households. This amount gradually reduces to zero as NBN Co completes the fibre rollout.

NBN fibre is aimed to be available to 93 per cent of premises in Australia.

If the NBN project is permanently grounded to a halt, Telstra’s obligation to decommission its copper assets will be limited to the footprint of the fibre network up to that point.

Should this cessation of the rollout be a result of anything else but a Government change of policy, NBN Co will still be contractually obligated to pay for all transit-related-infrastructure. Full infrastructure payments to Telstra have been listed as $5 billion.

If the cancellation of rollout is a result of change of Government policy, NBN Co will still have to pay but is entitled to cancel dark fibre and transit-related exchange rack payments as long as they were not already carrying live traffic.

“… Telstra retains the benefit of operating its copper network in areas outside NBN Co’s fibre footprint,” the telco said in a statement.

It should be noted that besides lead-in-conduits used by NBN Co, Telstra retains ownership of all infrastructure assets including decommissioned copper networks. The telco has yet to decide whether it will sell-off the unused copper to third-parties in order to get more value out of the decommissioned networks.

The Government has also committed to paying Telstra to retrain and retain staff for the NBN rollout over an eight-year period. The Department of Broadband, Communications and the Digital Economy (DBCDE) will pay Telstra $100 million once terms and conditions have been agreed upon.

Other deals between Telstra and the Government include the Telecommunications Universal Service Management Agency (TUSMA) agreement, information campaign and migration deed and Commonwealth Guarantee.

The agreement is subjected to approval by Telstra shareholders and the ACCC.

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Tags Telstranbn coDavid ThodeyNational Broadband Network (NBN)Hybrid Fibre Coaxial (HFC)

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