Australia, Telstra Sign Broadband Deal
SYDNEY--Telstra Corp. said Sunday it has agreed to participate in the Australian government's planned new national broadband network by allowing access to its infrastructure and traffic, a move that will deliver the telecommunications company a net 11 billion Australian dollars (US$9.57 billion).The deal, with the final contract to be negotiated in coming months, follows a year of wrangling between Telstra and the Labor government and will be viewed as an important stepping stone in the government's plan to roll out a new, A$43 billion "fiber-to-the-home" broadband network across Australia through its National Broadband Network Co.
Telstra's tentative deal comes as the government considers legislation to force the telecoms giant to split its retail and wholesale divisions, and it may also be seen as a boost for Prime Minister Kevin Rudd, who is currently struggling in opinion polls as an election looms.
Under the deal, Telstra will migrate its voice and broadband traffic from its copper and cable networks to the National Broadband Network, while still using its cable network to fulfill an existing contract with Foxtel, the subscription television provider.
This part of the agreement will carry a compensation package of A$9 billion. An additional A$2 billion will be provided by the government as it takes over Telstra's Universal Service Obligations, or the delivery of standard telephone services, payphones and emergency call handling.
Market analysts had speculated the compensation package for Telstra would likely settle somewhere between A$8 billion and A$12 billon.
"While today's agreement is an important step, a very significant amount of work must still be done on many complex issues," Telstra Chief Executive David Thodey said. He identified migration processes, taxation, legacy regulations and the risk of any major changes to the government's schedule to roll out the new network as among the issues to be ironed out.
Telstra also said it has been assured by the government it can bid for Long Term Evolution wireless spectrum and said it has received regulatory certainty on other matters allowing teh National Broadband Network and Telstra to complete the deal.
A final agreement, which would mean Telstra is the National Broadband Network's largest customer, will be put to Telstra shareholders in the first half of 2011.
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