Participation in NBN judged a $4.7b good deal for Telstra

Stuart Corner
Thursday, 01 September 2011 10:17

IT Industry - Listed Tech

Grant Samuel, the independent expert called on by Telstra to review its planned participation in the NBN under the definitive agreement, has backed the plan, concluding that Telstra will be $4.7b better off than under any alternative scenario.

The Grant Samuel report was released today by Telstra as part of the explanatory memorandum on the deal that will be sent to shareholders ahead of them being asked to vote on the definitive agreement at Telstra's AGM on 18 October.

In her foreword to the EM, Telstra chair Catherine Livingstone, told shareholders: "The independent expert has concluded that the proposed transaction is in the best interests of Telstra and its shareholders.

"The independent expert has also drawn two other key conclusions: if the rollout of the NBN is not completed as planned, Telstra shareholders would still be better off if they approved the proposed transaction; and even if the likelihood of the NBN being terminated early were materially increased by Telstra shareholders not approving the proposed transaction, the expected value of Telstra if the proposed transaction is implemented is greater than under the next best alternative."

Telstra has estimated that participation in the NBN under the terms of the definitive agreement will provide approximately $11b in post-tax net present value as at June 2010. However Telstra has used a different method valuing the proposed transaction from that used by Grant Samuel.

Telstra's figure of $11b represents consideration and benefits Telstra expects to receive from NBN Co and the Government, whereas the independent expert's $4.7b figure is the differential between the value of Telstra under the proposed transaction and of Telstra under the best available alternative given current Government policy.

Based on a discounted cashflow analysis, the independent expert has concluded that the value of Telstra if the proposed transaction proceeds is approximately $4.7b greater than under the best available alternative. Also the independent expert's assessment is made on a post-tax net present value basis as at June 2011.

Telstra adopted a different approach to that of the independent expert to assess the loss of value attributable to the fact that Telstra will no longer have the option to operate the copper network and broadband services on the HFC cable network in the NBN fibre footprint.

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