Aust NBN viable without Telstra, study says

Nicole McCormick
07 May 2010
Daily News

The Australian government’s plan to roll fiber to 93% of the population is feasible without Telstra’s involvement, according a joint study by KPMG and McKinsey.

The much-anticipated study, unveiled yesterday by Communications Minister Stephen Conroy, estimates that the state-owned NBN Co. – which will build and operate the network – would make a “modest return” of 6%-7% per year from year 15 without Telstra’s involvement.

“The study confirms that the company will generate sufficient earnings by the end of year seven so that the government’s recommended investment peaks at A$26 billion ($23 billion),” Conroy said.

Previously, the government had estimated it would have to invest up to A$43 billion in the project.

Conroy said the report showed there were “opportunities to significantly reduce the build cost” to less than A$38 billion.

However, the study also said savings of “A$5 billion or more” could be achieved if the government were able to strike an infrastructure sharing deal with Telstra.

The two parties have been in talks over injecting some of Telstra’s assets into the new network but have been unable to agree on a price.

In an effort to turn up the heat on the carrier, Conroy said yesterday he wanted a deal by the end of June, the Australianreported.

“I wouldn’t imagine that we could keep talking through to the end of the year. I wouldn’t imagine we could keep talking until the end of June. At some point, you have to make a decision and to get there, or not, then you shake hands and walk away,” he said.

Paul O’Sullivan, chief of no. 2 operator Optus, called on the government to go ahead with the NBN.

“Let Telstra make their decision in their own time and let's get on with the rollout,” he told the Australian.

Telstra's share price fell 2.27% to A$3.01 in trading on the ASX this morning.

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