Australia’s Prime Minister Kevin Rudd has struck an A$11 billion ($9.5 billion) deal with Telstra Corp., removing a lingering obstacle to the creation of the government’s national broadband network.

State-owned NBN Co., which is building the network to provide a high-speed fiber Internet network, will get access to Telstra’s infrastructure, Rudd announced at a news conference yesterday where he was joined by the company’s Chief Executive Officer David Thodey and Chairman Catherine Livingstone.
The pact signals an easing in tensions between the Rudd government and Telstra, the former government telecommunications monopoly.
The appointments of Thodey and Livingstone last May provided the turning point for the deal, which will lower the network’s cost, Rudd said. The government and Telstra also said the agreement would make the network cheaper, but neither would provide a new figure.
“This paves the way for a faster, cheaper and more efficient rollout of the network,” Rudd told reporters in Canberra. “This also means the network will be cheaper.”
The agreement, which needs to be approved by shareholders, will be worth A$11 billion, Telstra said in a statement released in Canberra. That pays for the decommissioning of Telstra’s copper network and cable broadband service, use of its infrastructure and the value of the phone company avoiding some costs.
“Telstra obviously sees commercial benefits in the NBN and this deal will be good for the company,” said Paul Budde, analyst at telecommunications research company Paul Budde Communication’s, said in a phone interview. “The company faces pressure on its margins because of a slowing in their traditional businesses and this opens up an opportunity.”
Livingstone said the company needs to forge a “definitive agreement” with the government. Its 1.4 million direct shareholders will get to vote on the agreement in the first half of calendar 2011, before new laws can be drafted and approval is sought from the Australian Competition and Consumer Commission. “Telstra has negotiated very hard,” Livingstone said in Canberra. “We will take the final proposal through an independent experts review.”
Telstra shares have lost 3.6 percent since the network was announced in April last year. Singapore Telecommunications Ltd., whose Optus unit is Telstra’s main rival, has gained more than 22 percent in the same period.
Telstra’s copper-wire platform is Australia’s only network. Telstra receives fees from rivals including Optus when they want to offer voice and Internet services in Australia.
Rudd announced the NBN plan in April last year, touting the network as the biggest change to the market dominated by Telstra. NBN plans to deliver coverage to 90 percent of the country at data-transfer speeds of 100 megabits per second, faster than services available to many homes and businesses.
Separate start-up networks are being pursued in New Zealand and Singapore, government documents show.
Communications Minister Stephen Conroy said the new speeds would bring Australia “up to par” with other countries. The government has not provided an international comparison on speeds.
The project, which will take eight years to build and will be sold once it is operational, has attracted criticism over Australia not have enough customers to make the project viable and that the current speeds are efficient.
Telstra has said it already had “world-class fixed, cable and wireless networks, including the largest, fastest national wireless broadband network in the world.”
Yesterday’s agreement was reached after months of “complex and at times colorful” negotiations, Conroy said.
The “single most important change that took place was when the Telstra board elected Catherine and David as chair and CEO,” Conroy told reporters in Canberra when asked about improved relations with Telstra. Thodey replaced Sol Trujillo, who arrived from California in 2005, and Livingstone replaced Donald McGauchie. The previous tenure was marred by clashes with successive governments.
Telstra will not get a stake in NBN Co., but will be the network’s biggest customer, Conroy said. Telstra will also continue to use its cable network to meet its contract with Foxtel Management Pty Ltd.
(Source: Bloomberg)