Telstra prepares to acquire NBN.
It looks as if Telstra and NBN are increasingly likely to merge, perhaps not long after 2022, as a result of Telstra's exclusive position in the fixed-line business and the harsh reality faced by taxpayers.
Statements this week from Telstra chairman John Mullen and Labour shadow communications minister Michelle Rowland portray the premise that a restructuring of the telecoms industry's fixed-line business is beginning to take shape.
It is clear that Telstra is ready to buy NBN as soon as NBN is finished when Andy Penn, Telstra's president, announced his T22 strategy at the beginning of the year.
A key part of this strategy is the spin-off of infrastructure from Telstra's retail business.
A separate entity Telstra InfraCo will take over the group's fixed network, data center, non-mobile optical fiber, coaxial cable networks, international submarine cables, switches, pipelines, NBN associated revenue and wholesale operations.
Speaking at the company's annual meeting on Tuesday, Mullen said that, although no discussions had been held with government, Telstra had made it clear that "We will create an InfraCo, internally so that when government decides to privatize NBN, it is having difficulty dealing with this issue." Telstra can provide a solution. "
Given that NBN Co will have to pay 1 billion yuan a year for pipelines, switches, fiber-optic loops and copper wires using Telstra until 2046, Telstra is an obvious buyer of NBN Co.
The deal could be worth between 12 billion and 15 billion.
If InfraCo and NBN Co merge, there will be huge financial and operational synergies.
Telstra knows very well that it is impossible to acquire NBN within the existing framework.
If it intends to acquire, InfraCo must be independent from Telstra.
The obstacle to this deal is the economics of NBN.
When Kevin Rudd and Stephen Conroy launched the national fiber-to-the-home concept, they and NBN's management believed the construction could be completed at a cost of 40.9 billion.
When Turnbull revised the strategy to a mix of end-of-life links, it was clear that Labour's plan was a daydream, and the government's Strategic Assessment Panel concluded that the cost would cost 72.6 billion.
If Labour comes to power next year, it could change everything.
Although the Unionparty has ruled out asset write-offs on NBN, the Labour Shadow Communications minister Rowland said this week that it would be open to all options.
Asset write-offs will allow NBN Co to lower fees and get higher business returns.
It will allow retailers to make money from selling NBN products and encourage users to use faster products.
The key factor for Labour is the scale that needs to be reduced.
It is estimated that taxpayers will have to bear losses ranging from 20 billion to 40 billion yuan.
Labour can, of course, blame Turnbull.
We'll never know if Labour's original plan will cost 40.9 billion, 72.6 billion or 100 billion, which is more expensive than Turnbull's and will take longer to complete.
A merger with NBN Co would be a viable option and could recover more value if Labour were to make a substantial write-off of NBN Co's 29.5 billion assets and 21.4 billion debt.
