Telstra, NBN Co commence court battle over contract dispute
- 01 July, 2014 12:35
Telstra has told a court that NBN Co could owe the telco more than $100 million over the next 30 years depending on the interpretation of the parties’ $11 billion contract.
“It’s a nine-figure sum, your honour,” Telstra counsel Alan Archibald said at the NSW Supreme Court this morning. “It has very significant impact.”
At oral arguments this morning at the NSW Supreme Court in Sydney, Justice Robert McDougall heard the initial arguments of Telstra, with NBN Co set to outline its response later in the day.
The dispute relates to the $11 billion agreement in which Telstra agreed to migrate its customers to the NBN and decommission its copper network, as well as allow NBN Co access to its pits, pipes and ducts.
The two parties seek to clarify when consumer-price-index (CPI) adjustments apply to the price that Telstra charges NBN Co to access its infrastructure.
The agreement between Telstra and NBN Co allowed for CPI increases from the first of January every year after the commencement of the agreement. However, Telstra and NBN Co have disagreed over the precise date that the agreement commenced.
The agreement was signed in June 2011, so Telstra argues that CPI increases should take effect from 1 Jan 2012. However, NBN Co argues that the agreements were only finalised in March 2012, and so the CPI start date should be 1 Jan 2013.
The difference, depending on when CPI adjustments began, is estimated to be worth more than $100 million.
Telstra’s attorney, Archibald, contended that the initial 2011 agreement with NBN Co set commercial terms of the agreement, including a CPI indexing clause, and did not allow for major changes to be made in the definitive agreement that would be finalised in 2012.
“The financial framework was essentially set in a binding fashion by this agreement,” he said.
He also said that, when announcing both the 2011 and 2012 agreements, Telstra and NBN Co agreed that the value of the deal would be $11 billion. He argued that this showed the parties agreed about the value of CPI indexing at the time of each agreement.
The estimated two-day court trial is happening after an earlier attempt at mediation between the parties failed.
Telstra has said that the timing of the court action is unrelated to possible renegotiation of the deal with NBN Co, "although resolving this disagreement will help provide greater certainty and as such may assist future policy discussions".
In December, NBN Co released its strategic review of the NBN, which recommended renegotiation of the Telstra contract to allow for a multi-technology approach replacing the existing fibre-to-the-premise scheme chosen by the Labor party.