Telstra may sell assets elsewhere: Analyst

James Riley
Wednesday, 28 October 2009 10:31

IT Policy - Government Tech Policy

Telstra is almost certainly looking for potential buyers of its network assets outside of the NBN Company in a structurally separated scenario that would work against Government’s objectives for the telecommunications sector, analysts say.

Telstra has options for its network assets outside of any discussions with Government, Ovum Asia Pacific senior consultant Craig Skinner says, including scenarios that could see its copper and HFC networks sold to an investment fund.

"If Telstra does separate, that's not necessarily going to be to the benefit of the NBN Company," Skinner told iTWire. "If you’ve got a network asset company that holds those copper and HFC networks, they are still going to be looking to maximise the cash flow that they get out of that business."

"So they will still compete very heavily and aggressively with the NBN. So it doesn't automatically help the Government terribly much by having a structurally separated Telstra," he said.

It would be unlikely that Telstra would not explore these options, including either spinning off the assets, or selling them into network provider or even a construction company, with the scenarios providing a point of leverage in negotiation with Government.

Inside the negotiation, the main game for both sides remains the transfer of customers to the NBN – including Telstra as a customer – rather than the assets. For Government, Skinner says the acquisition of assets themselves may be convenient to provide political cover by giving it something more tangible to show for its money than a customer transition plan.

The sale of assets to a fund or other provider would be a worst case scenario for Government, mainly because a buyer would most likely seek guarantees from Telstra that it would retain traffic on the network.

"It might not be something that Telstra would prefer to do, but I certainly think they would be explaining to the Government as part of the negotiations that 'if we structurally separate, this is what is going to happen' and that it’s not going to be to the benefit of the NBN Co," Skinner said.

"There would be people in Telstra definitely running through the scenarios and working out what the impact is going to be on Telstra, and what the impact is going to be on the NBN Co – and then presenting selected parts of that analysis to the Government as part of the negotiations."

"For the Government, the really do need to get Telstra on board for the NBN Co to be successful. So there is a lot of pressure from that sense for the Government to come up with a deal that is acceptable."

Telecommunications analyst Paul Budde said Telstra had a number of options, including interest from international consortia who are looking at the NBN in which Telstra figures in their plans.

Budde believes that once the negotations between Government and Telstra conclude - regardless of the outcome, other consortia and interested parties will start to come out into the open.