Saturday, June 19, 2010

Australia's NBN Co and Telstra Reach Sharing Agreement

NBN Co Limited (NBN Co), the consortium established to design, build and operate Australia's forthcoming wholesale-only National Broadband Network (NBN), reached an agreement with Telstra that would provide access to Telstra facilities and the progressive migration of Telstra traffic onto the National Broadband Network, subject to regulatory approval. The agreement for these terms will have an approximate value of $9 billion and would enable Telstra to participate in the rollout of the National Broadband Network (NBN). Separately, the Australian federal government has agreed to progress public policy reforms with an attributed value of approximately $2 billion to Telstra.


NBN Co was established in April 2009 to design, build and operate a wholesale-only national high-speed broadband network for all Australians. In the fibre footprint, the network will deliver broadband speeds of up to 100 Mbps, subject to the retail plan chosen.


"This is a sound outcome for NBN Co because when finalized it can maximise the use of existing infrastructure and accelerate the roll out of its network," said NBN Co Chief Executive, Mike Quigley. "It also means Telstra is likely to become NBN Co's largest customer as it progressively migrates its voice and broadband traffic to NBN Co's wholesale-only, open-access network, providing greater certainty about future revenues."

Telstra calculates that if the transaction is completed, it would deliver to Telstra a post-tax net present value of approximately $11 billion. This includes payment for the decommissioning of Telstra's copper network and cable broadband service, use of Telstra's infrastructure, and the value to Telstra of avoiding costs, including certain Universal Service Obligation (USO) costs. Payments would be made progressively to Telstra.


The transaction would see Telstra progressively migrate its voice and broadband traffic from its copper and cable networks to NBN Co's network as it is rolled out. Telstra will continue to use its cable network to meet its pay TV contract with FOXTEL.


Telstra Chairman Catherine Livingstone said the milestone was encouraging after a year of complex negotiations.


"The Heads of Agreement is consistent with the Government's high-speed broadband vision and desired industry structure. This agreement reflects a commitment by all parties to reaching a mutually beneficial outcome for Telstra investors, customers, employees and the industry," Livingstone said.

Telstra also noted that while the Government is not a party to the Heads of Agreement, Telstra has received written confirmation from the Prime Minister that Telstra would be able to bid for LTE wireless spectrum should the transaction be completed and that sufficient regulatory certainty will be provided on a range of matters for NBN Co and Telstra to enable the transaction to proceed.


The Heads of Agreement covers the migration of subscriber traffic and the decommissioning of Telstra's copper network and its cable broadband service. NBN Co will pay Telstra for migration of traffic on to the NBN and the decommissioning of its network. The Heads of Agreement also provides for NBN Co's use of Telstra's existing fit-for-use infrastructure, such as ducts, pits and conduit and a right to acquire Telstra backhaul services and space in Telstra exchanges.
http://www.nbnco.com.auhttp://www.telstra.com

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