NBN exclusion won't impact us, says Telstra

Stuart Corner
Thursday, 18 December 2008 03:16

IT Industry - Strategy

Faced with a plummeting share price in the wake of being locked out of the National Broadband Network RFP process, Telstra has written to its shareholders to tell them that the exclusion will have no impact on its business or its financial guidance, and to talk up is ability to compete using its existing and planned network technologies.

In the letter, signed by CEO Sol Trujillo and chairman, Donald McGauchie, Telstra says: "This week's decision by the [NBN] Expert Panel has no impact on our overall business strategy and the execution of our transformation plan. Telstra's enviable financial position and strong fundamentals are no different today than they were last week before the Expert Panel made its decision. Importantly, there is no change to our financial guidance as a result of the Expert Panel's decision."

The letter concluded: "Regardless of what happens with the NBN, Telstra's transformation and strong financial position mean we will continue to deliver world-leading services to our customers and strong returns to our 1.4 million shareholders."

Telstra's shares were at 4.25 on 10 December and following it revealing its exclusion from the NBN on 15 December fell steadily to close at $3.51 on 16 December after sinking briefly to $3.36. However they picked up slightly the following day to close at $3.56.

Telstra also talked up the potential for it to compete against a future NBN using its existing networks, and anticipated upgrades to these, saying: "With the platforms we already have in place, we will continue to compete and innovate very effectively."

However it stretched the truth somewhat in its claims for Next G's capabilities, saying: "Early in 2009, Next G will offer peak network speeds of 21Mbps with a clear roadmap to 42Mbps and beyond." These speeds are the theoretical maxima of Telstra's current implementation of HSPA and the next planned upgrade. It is widely accepted that, in practice, these technologies will never deliver anywhere near these speeds.

The letter continues: "Our fixed line broadband network delivers ADSL from exchanges serving 92 percent of the population, with ADSL2+ providing speeds up to 20Mbps from exchanges that serve 81 percent of the population." This is true but only a fraction of that 81 percent living with a few hundred metres of the exchange can hope to get 20Mbps.

Telstra boasted that "Our hybrid fibre co-axial (HFC) cable broadband network passes over 2.5 million capital city premises. Big Pond Cable Extreme is available to more than 1.8 million Sydney and Melbourne homes and businesses in the HFC footprint at speeds up to 30Mbps, with speeds up to 17Mbps in all other parts of the HFC network. We are in a position to roll-out technology that is being deployed in Europe and the US, which will enable the HFC to deliver speeds of up to 100Mbps.

Unlike ADSL, the 'last mile' of an HFC network is shared among all users, so no individual user is likely to get the maximum throughput available.