Telstra extends helping hand to Reach

Telstra has once again agreed to fork out a further $138 million to help its troubled undersea cable joint venture Reach.

The latest handout from Telstra is to help the Asian cable network meets its capital expenditure commitments up to 2022.

The news comes ahead of Telstra's third quarter results to be announced Tuesday.

Commsec Telecommunications analyst Graeme Woodbridge said the handout came as no surprise and said the number is within expectations. In January, Reach announced it would rid itself of most customers to eventually leave its 50/50 owners, Telstra and Hong Kong's Pacific Century CyberWorks (PCCW) as its only two customers for its data capacity.

That decision was formalized today as part of a wider agreement on its operating model.

Under that agreement, both Telstra and PCCW have agreed to pay an equal share of Reach's capital expenditure commitments.

A Telstra spokesman said the funding would be provided in various installments over time, with the first during the 2005 calendar year of $44.3 million. Both Telstra and PCCW have also agreed to pay Reach $204 million for their data capacity.

However, in Telstra's case no new money actually needs to be provided, because it was mostly already paid in 2003 when the telco bought some data capacity to last until 2010.

That particular contract has now been cancelled, with PCCW repaying the money - with interest - and Telstra now using it to pay for capacity under the new agreement.

Reach was formed through a joint venture between Telstra and PCCW in the middle of the tech boom of 2000.

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