FINALLY! Telstra Seals $11B NBN Deal

Telstra has finalised agreements with NBN Co and the government regarding the NBN rollout, it announced today.

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The ‘Definitive Agreements’ with the company charged with the National Broadband Network rollout, NBN Co, and the government are expected to provide Telstra approximately $11 billion (post-tax) net present value over the long term, Telstra CEO David Thodey confirmed.

Telstra shareholders approved the proposed split up of the company and NBN deal, which will see it surrender its copper network, infrastructure, pits and ducts, at its AGM last year and some major new investments by the telco is expected following the huge cash windfall.

“The agreements are expected to also contribute to free cashflow generated in the medium term, provide us with greater financial flexibility and a stronger balance sheet, and help to offset the decline in free cashflow expected as customers migrate onto the NBN,” Thodey said.

This confirmation comes as the competition watchdog, ACCC, gave final approval to Telstra’s revised draft of its Structural Separation Undertaking, which outlines the break up of its retail and wholesale divisions during the rollout of NBN, last week.

The break up of Australia’s largest telco is to be completed by July 1 2018.

Mr Thodey confirmed the Structural Separation Undertaking (SSU), had also now come into force.

“Compared with other realistically available options this outcome should deliver a better overall financial outcome, a more stable regulatory environment and greater strategic flexibility, enabling Telstra to maintain a strong focus on our key areas of growth,” Mr Thodey said.

The government will fork out $190 million to Telstra under the Information Campaign and Migration Deed, expected later this year and will be amortised over three years as ‘Other Income’ on its balance sheet as costs are accrued.

The payment is outside Telstra’s guidance for fiscal year 2012.

Telstra will retain ownership of its Hybrid fiber-coaxial (HFC) network and its 50% share in FOXTEL, it also confirmed.

This followed three years of complex and prolonged negotiations, with ACCC, Government, NBN Co, while rivals including Optus voiced their concern over Telstra $11 deal with NBN and its proposed break up.

Thodey said he was “pleased” with the positive outcome. 

Last week, Telstra revealed its NBN high speed broadband pricing, which starts at $49 for 50GB and is available in NBN test areas in NSW, QLD, Victoria and Tas and SA.