Telstra today signed a non-binding Financial Heads of Agreement with NBN Co to participate in the rollout of Australia's National Broadband Network (NBN).
The agreement between NBN Co and Telstra is expected to be worth $9 billion and includes the reuse of suitable Telstra infrastructure, and the progressive migration of customers from the telco's copper and pay TV cable networks to the new wholesale-only fibre network that will be built and operated by NBN Co.
The use of Telstra infrastructure includes pits, ducts and backhaul fibre and the decommissioning of Telstra's copper network and cable broadband service.
The Federal Government welcomed the announcement and said the deal with Telstra will "avoid unnecessary infrastructure" duplication during construction of the NBN. It also said the agreement will reduce the overall cost of building the network for taxpayers, result in higher take-up rates and revenue for NBN Co. The Government will mean less overhead cabling thanks to a greater proportion of the NBN rollout taking place underground.
"We will continue to work with the Government and NBN Co on the detail required to implement the principles agreed today," said Telstra CEO David Thodey. "While today's agreement is an important step, a very significant amount of work must still be done on many complex issues."
These issues are as "diverse as migration processes, taxation, the future of legacy regulations applying to Telstra and the consequences of any major changes to the NBN rollout schedule," according to a Telstra statement.
Telstra estimates that the agreement announced today will deliver Telstra a post-tax net present value of approximately $11 billion. The payments by NBN Co to Telstra will be made over a number of years as the NBN rollout progresses.
A joint statement issued by Prime Minister Kevin Rudd, Minister for Finance and Deregulation, Senator Lindsay Tanner and Communications Minister, Senator Stephen Conroy, said that the agreement will "ensure Australia finally has a genuinely competitive telecommunications industry which works for all Australian households and businesses, and helps to drive long-term productivity growth in our economy."
The agreement still requires the approval of the Australian Competition and Consumer Commission (ACCC) and Telstra shareholders, and can't be guaranteed. Telstra expects the agreement will be put its shareholders in the first half of 2011.