Telstra and SingTel signs key NBN deals worth $11.8bn

Australia’s National Broadband Network received a significant boost with the news that the operators Telsta and SingTel have agreed major deals to transfer parts of their networks to the NBN. As part of the deal, the state owned NBN will pay Telsta $11bn for its copper network, while the SingTel owned Optus network will receive $800m to move customers from its fibre optic network, freeing up its infrastructre for the NBN.

The move still has to gain approval from Telstra’s shareholders and the vote will take place on 18 October. Clearance from the Australian regulatory body the ACMA is also required.

Julia Gillard, the Austrialian Prime Minister said the deal would deliver to householders “more options, more choice and cheaper prices”. Broadband minister Stephen Conroy said it would “change the way the nation communicates and does business”.

“It’s clear that Telstra has done its own cost benefit analysis for its participation in the deal versus the alternatives and has determined this is the best approach in the current environment”, said Nigel Pugh, consulting director of analyst firm Ovum. “If the remaining hurdles are passed (ACCC acceptance of Telstra’s structural separation undertaking and migration plan and Telstra’s shareholder vote) then Telstra will have a clear strategic direction for operation of its retail and wholesale functions in an NBN world. This will also be a positive for NBN Co as the key hurdles to its nationwide rollout will have been overcome”.

The move is seen as a fillip for the incumbent Labour government which had promised to deal with Austrialia’s slow fixed line broadband speeds as well as to bring internet access to the remote population.

A key issue is the fact that the government opposition party has pledged to review the project should it come into power, but Ovum’s Pugh doesn’t think this will be an issue.

“Although there has always been an overhang to the deal with regards to a change of government, our initial reading of the cessation clauses don’t position this deal as a poison pill if there is a change of government at the next election. NBN Co will have to reach 20 per cent fibre coverage for the compensation payment to occur and, based on our reading of NBNCo’s three year corporate plan, we think this will be a stretch to achieve by 2013.”

Optus’ chief executive Paul O-Sullivan said in a statement that, “this deal supports the NBN to create a level playing field for all telcos. Australian consumers will be the winners.”