Sunday, 14 December 2014 15:09

It’s here! NBN Co and Telstra sign the Big Deal Featured

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Thodey, Turnbull and Morrow - Merry Christmas Thodey, Turnbull and Morrow - Merry Christmas

Malcolm Turnbull said it would happen by June. He was six months out. In the shadow of Christmas, on a Sunday afternoon, the new NBN deal with Telstra has been announced.

When a Government called a press conference for a Sunday afternoon, with only 90 minutes’ notice, there are two possible reasons. Either it has something to hide, or it’s so important it just can’t wait.

In this case, it’s a bit of both. Telstra and the Government have now signed off on the revised NBN Definitive Agreements, made necessary by the major changes Malcolm Turnbull has made to the original all-fibre network announced by his Labor predecessors.

The value of the revised deal is unchanged, at $11 billion, though there will be some adjustments as the arrangements to transfer Telstra’s copper and hybrid fibre coaxial (HFC) assets are executed. A deal has also been finalised with Optus for the NBN Co to acquire its HFC network (see following article). The revised definitive agreements will enable the rollout of the Government’s multi-technology mix (MTM) NBN.

Turnbull announced the agreement at an impromptu press conference held on the 21st floor of the Commonwealth Parliamentary Offices in Bligh Street, Sydney. The proceedings were broadcast live on ABC 24.

NBN Co CEO Bill Morrow and Telstra CEO David Thodey also spoke briefly, outlining the key aspects of the agreement under which Telstra’s copper and HFC assets will move to NBN “at no incremental cost,” though the costs of making the transition will be borne by NBN Co.

Thodey said that Telstra’s number one objective was that “we have achieved the key principle, agreed to by the parties, of maintaining the overall value of the original agreements. As a result, our shareholders have been kept whole in terms of the transaction they approved in October 2011.

“As with the original agreements, the estimated value of the revised agreements is based on a range of dependencies and assumptions over the long term life of the agreements.”

The main change to the original agreements relates to the approach taken to Telstra’s copper and HFC networks. Under the original agreements, Telstra was required to progressively disconnect premises connected to its copper and HFC broadband networks as the NBN is rolled out.

Under the revised agreements, Telstra will continue to disconnect premises, but where NBN Co uses these networks to deliver an NBN service, Telstra will progressively transfer ownership, and the operational and maintenance responsibilities for the copper and HFC assets, to NBN Co. The payment structure remains linked to the rollout of the NBN.

Telstra will continue to deliver Foxtel pay TV services through continued access to the HFC network negotiated with NBN Co.

Thodey said the revised agreements included important protections for Telstra’s shareholders. “We have retained existing shareholder protections and also negotiated new ones in lieu of the protection that our continued ownership of the copper and HFC network assets provided under the original agreements,” he said.

“We have also improved and simplified the agreements based on what we have learned working with the original agreements over the last three years, including removing some of the complexity and reporting processes.”

Thodey said it would be necessary to make changes to the Migration Plan to adapt it to the Government’s MTM model. “The customer experience and continuity of service for retail and wholesale services moving from Telstra’s networks to the NBN has been front of mind throughout the negotiation, and we will now work through these with industry and the Australian Competition and Consumer Commission (ACCC).”

The agreements remain subject to a number of conditions, including the ACCC’s acceptance of the revised migration plan and acceptance of the Australian Taxation Office.

“Importantly, we do not foresee any necessary changes to our SSU (Structural Separation Undertaking), as we will continue to meet this commitment through the progressive disconnection of premises and transfer of ownership of our copper and HFC networks to NBN Co over time.”

Thodey said Telstra’s board had decided that no further shareholder approval was necessary, “as the estimated value of the original agreements, approved by shareholders in 2011, has been maintained and Telstra’s existing commitment to the SSU remains.

“Telstra continues to work with NBN Co on the delivery of its FTTN trial and remains in discussion with NBN Co on the provision of planning, design, construction and maintenance services by Telstra to NBN Co on commercial terms. These services will be separate and in addition to the revised agreements.”

When asked what they key sticking points were, Thodey said the actual agreement was straightforward but the technical complexity was difficult. It was about access arrangements, not the dollar value. He said the cashflow projections were not significantly different to that envisaged under the previous agreement.

“There has been a very conservative assumption based on the costs of remediating the assets being transferred,” said Turnbull, echoing his previous “not a penny more, not a penny less” pronouncement. “The agreement is over 2000 pages,” said Morrow. “Our staff have said it’s a vast improvement over the previous agreement.”


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Graeme Philipson

Graeme Philipson is senior associate editor at iTWire. He is one of Australia’s longest serving and most experienced IT journalists. He is author of the only definitive history of the Australian IT industry, ‘A Vision Splendid: The History of Australian Computing.’

He has been in the high tech industry for more than 30 years, most of that time as a market researcher, analyst and journalist. He was founding editor of MIS magazine, and is a former editor of Computerworld Australia. He was a research director for Gartner Asia Pacific and research manager for the Yankee Group Australia. He was a long time weekly IT columnist in The Age and The Sydney Morning Herald, and is a recipient of the Kester Award for lifetime achievement in IT journalism.

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