Telstra has launched a wholly-owned networking subsidiary, Network Design and Construction (NDC), in an effort to reduce the cost of network design and construction services.
The launch of the carrier's new commercial arm follows a six-month internal feasibility study and consultation with Deloitte & Touche Consulting Group.
According to Gerry Moriarty, Telstra's group managing director, network technol-ogy and multimedia, NDC will have to compete to supply Telstra with network design and construction services, currently costing the carrier $1.5 billion annually.
"The decision will require NDC to provide design and construction services to Telstra on a competitive basis," Moriarty said.
In addition, NDC will bid for non-Telstra work, in a move the company reports will "open up opportunities for NDC and its employees".
A Telstra spokesman explained that the company's network construction projects have peaked and are now waning. It completed a $3.3 billion network modernisation program at the end of 1998.
To retain the business unit in-house would have meant downsizing it, the spokesman said. Instead, Telstra decided to launch it as a subsidiary and allow it to bid for external work.
According to the spokesman, Telstra management are thinking of reviewing the subsidiary's wholly-owned status in a couple of years.
NDC reports that from the beginning of financial year July 1, 1999, it will offer contract packages worth around $300 million to the market.
NDC's newly appointed chairman of the board is Doug Campbell, former group managing director, carrier services group.
Telstra has not yet decided how much capital it will inject into the new subsidiary.