Deal to split Australia’s telco OK’d by shareholders

SYDNEY – Shareholders of Australia’s incumbent telecom carrier Telstra have approved the AUS$11 billion deal between it a new broadband provider, but the Australian Competition and Consumers Commission (ACCC) can still make or break the agreement.

Shareholders voted Tuesday at the telco’s annual general meeting here, with 99.09 per cent of proxy votes giving the deal with NBN Co. the go-ahead. This was enough to approve the lucrative agreement. The total count is expected to be available by the day.

 

(For background on NBN, click here)

 

(ISPs have been fighting with Telstra over connectivity for years.)

The agreement involves Telstra progressively decommissioning its copper network and migrating customers onto the National Broadband Network (NBN), which is building a wholesale fibre optic network for retail Internet service providers. The providers have been buying connectivity from Telstra.

NBN’s network will offer speeds of up to 100 Mbps to 93 per cent of Australian premises by 2021. The remaining seven per cent of premises are expected to receive high-speed broadband via fixed-wireless and satellite. The rollout of both services expected to be complete by 2015.

An independent expert, Grant Samuel, concluded the deal is “approximately $4.7 billion greater than under the best available alternative”. Telstra’s board unanimously recommended shareholders to approve the deal as it would provide the telco with a better financial outcome as well as regulatory stability.

Telstra stressed if the company rejected the deal and refused to structurally separate, which is a crucial part of the agreement, it would have to compete with a formidable NBN Co. and be locked out of accessing new spectrum for developing wireless broadband services.

The telco has been required to submit a structural separation undertaking (SSU) committing itself to separating its retail and wholesale arms. The ACCC had previously expressed dissatisfaction with the document.

The ACCC had a number of concerns and requested Telstra to resubmit the SSU, which will be done in the coming weeks. If the watchdog rejects the SSU, the Telstra-NBN Co deal will fall through.

Telstra has expressed confidence the ACCC will come around eventually.

“I would remind you the ACCC chairman, Rod Sims, has commented that he thinks the issues with the SSU are not insurmountable,” Telstra CFO, John Stanhope, said at the annual general meeting.

Simon Hackett, managing director of national Internet provider Internode, called the SSU a form of blackmail on Telstra’s part because if the ACCC does not approve the document in its current form, it would spell more delays for the NBN.

A new SSU would require shareholder approval again, which could take up to six to nine months.

With the AUS$36 billion network already behind schedule, the government cannot afford any more delays, especially since the Telstra deal was supposed to cut NBN’s cost and construction time.

But according to Ovum research director and telco analyst, David Kennedy, the ACCC is at a particularly advantageous position.

“Failure by Telstra to conclude an SSU by 31 December 2011 would activate the statutory requirements for a compulsory functional separation,” he said in a statement.

If that occurs, the ACCC and Communications Minister, Senator Stephen Conroy, will be calling the shots in terms of how to separate Telstra’s retail and wholesale business, leaving the telco with very little control on the matter, he said.

“Ultimately, Telstra must accept some form of separation, and a structural separation negotiated with the ACCC is the ‘least worst’ option,” Kennedy said.

 

(From Australian Reseller News)