Telstra, NBN Sign Financial Heads of Agreement
29 October 2012
Telstra and NBN Co have signed nonbinding Financial Heads of Agreement to participate in the rollout of Australia’s National Broadband Network (NBN), according to media statements issued by both companies.
The agreement would provide NBN Co 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 A$9 billion. Separately, the Federal Government has agreed to progress public policy reforms with an attributed value of approximately A$2 billion.
The transaction, if completed, would include 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.
Telstra will continue to use its cable network to meet its pay TV contract with FOXTEL.
Telstra chair 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.
“This is a sound outcome for NBN Co because when finalized, it can maximize 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.”
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 Long Term Evolution (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.
In addition to requiring shareholder approval, the Heads of Agreement has a range of conditions, including the passage of necessary enabling legislation and ACCC approval. Accordingly, there can be no guarantee at this time that the transaction will progress to completion.
The Heads of Agreement provides the framework for definitive agreements to be negotiated over the coming months. Should those agreements be finalized, Telstra expects they would be put to shareholders in the first half of calendar 2011. Shareholders and investors would receive comprehensive detail in relation to the definitive agreements and an independent expert’s report on the transaction well before the shareholder vote.
