Updated: Telstra apathetic on NBN report

Study says cash investment or no deal

Telstra (ASX: TLS) has provided an apathetic response to a report that claims it is not required for the success of the National Broadband Network (NBN), although it said it will look into its findings.

The McKinsey-KPMG NBN Implementation Study recommends the Federal Government should retain full ownership of the NBN Company until the roll-out is complete, and not offer equity in return for vended-in assets.

The recommendation could increase the likelihood of a cash deal between Telstra and the Federal Government which are engaged in negotiations regarding the use of the telcos assets in the NBN. The Federal Government said it wants Telstra to structurally separate and if the telco giant won't do so voluntarily, the Rudd administration will use regulation to achieve the goal.

When originally contacted a Telstra spokesman told Computerworld Australia the telco's response would not be worth publishing, but said in a written statement that it is "interested in [the report's] findings and will consider them in detail”.

Federal Communications Minister Stephen Conroy would not comment on the state of negotiations, saying he will “not provide a rolling commentary”.

“The implementation study also confirms that while infrastructure sharing and other commercial arrangements with existing telecommunications companies can benefit the project, the NBN will be financially viable even without the participation of Telstra,” Conroy said.

“The NBNCo says it will cost x dollars for the fibre, and Telstra has its own value — clearly there is a difference.

“We are in lengthy and complex negotiations and if both parties feel there is no point… we will shake hands and walk away,” he said, adding he “wouldn’t want” the discussions to go past June.

Conroy confirmed the Telstra separation Bill will be introduced Wednesday, and told a press gallery the "Bill deals with the existing structure of the market today… and gives new powers to the ACCC to try and deal with some of the problems this sector has had endemically”.

The $25 million study reports the NBN can be implemented within the original $43 billion estimate of capital expenditure and claims the peak government funding requirement will be about $26 billion in year six of the NBN project. “This would be a temporary funding need since subsequent to this peak, NBN Co is expected to be able to support private sector debt of up to $32 billion by year 15,” the study reads.

Some analysts have painted a rosy picture for Telstra in the event of a split. RBS analyst Ian Martin said the “worst case outcome” for Telstra will mean they will compete with the NBN Co — which could become a retailer under proposed legislation — but would enjoy “very good growth in other parts of [its] business”.

Listen to the full speech by Senator Stephen Conroy and Senator Lindsay Tanner

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