Telstra signs revised NBN Definitive Agreements

Media Release, 14 December 2014

Telstra today signed revised definitive agreements with NBN Co and the Commonwealth to enable the rollout of the Government’s multi-technology mix (MTM) National Broadband Network (NBN).

The agreements remain subject to a number of conditions precedent, including Australian Competition and Consumer Commission (ACCC) acceptance of a revised Migration Plan and receipt of acceptable rulings from the Australian Taxation Office.

The estimated net present value[1] (NPV) which the revised agreements are expected to deliver is equivalent, on a like for like basis, to the estimated NPV of the original agreements.

Chief Executive Officer David Thodey said: “We have achieved the key principle, agreed to by the parties, of maintaining the overall value of the original agreements.

“As a result, our shareholders have been kept whole in terms of the transaction they approved in October 2011.”

As with the original agreements, the estimated value of the revised agreements is based on a range of dependencies and assumptions over the long term life of the agreements.

The main change to the original agreements relates to the approach taken to Telstra’s copper and Hybrid Fibre Coaxial (HFC) networks. Under the original agreements, Telstra was required to progressively disconnect premises connected to its copper and HFC broadband networks as the NBN is rolled out. Under the revised agreements, Telstra will continue to disconnect premises. However, where NBN Co uses the copper and HFC networks to deliver an NBN service, Telstra will progressively transfer ownership, and the operational and maintenance responsibilities for the relevant copper and HFC assets, to NBN Co. The payment structure remains linked to the rollout of the NBN.

Telstra will continue to deliver Foxtel pay TV services through continued access to the HFC network negotiated with NBN Co.

Mr Thodey said the revised agreements included important protections for shareholders.

“We have retained existing shareholder protections and also negotiated new protections for shareholders in lieu of the protection that our continued ownership of the copper and HFC network assets provided under the original agreements,” said Mr Thodey.

“We have also improved and simplified the agreements based on what we have learned working with the original agreements over the last three years, including removing some of the complexity and reporting processes.”

Mr Thodey said it would be necessary to make changes to the Migration Plan to adapt it to the Government’s MTM model.

“The customer experience and continuity of service for retail and wholesale services moving from Telstra’s networks to the NBN has been front of mind throughout the negotiation, and we will now work through these with industry and the ACCC.

“Importantly, we do not foresee any necessary changes to our Structural Separation Undertaking as we will continue to meet this commitment through the progressive disconnection of premises and transfer of ownership of our copper and HFC networks to NBN Co over time.”

The Board has decided that no further shareholder approval is necessary as the estimated value of the original agreements, approved by shareholders in 2011, has been maintained and Telstra’s existing commitment to structural separation remains.

Telstra continues to work with NBN Co on the delivery of its FTTN trial and remains in discussion with NBN Co on the provision of planning, design, construction and maintenance services by Telstra to NBN Co on commercial terms. These services would be separate and in addition to the revised agreements.

Additional information on the revised agreements is attached.

[1] Approximately $11bn post tax NPV as at 30 June 2010