Will Telstra Corporation receive $98 billion from NBN?

Australia’s copper phone network and all those existing ducts and pipes are estimated to be worth a whopping $98 billion to Telstra Corporation (ASX: TLS), according to a new report.

Telecommunications industry publication CommsDay estimates that NBN Co could pay Telstra that amount over the next 55 years for infrastructure leases and other fees.

The report cites analysis by investment bank Goldman Sachs which showed the company building the national broadband network would have to pay Telstra $98.2 billion in nominal pre-tax profits between 2011 and 2067. $88 billion would be from infrastructure leases on items like underground ducts and pipes which NBN Co needs to use to roll out the fibre network.

While Telstra has specifically reported its existing deal with NBN Co is worth $11 billion in net present value, the exact details have never been released. Both companies are currently renegotiating that contract, as NBN Co needs control of Telstra’s copper and cable broadband networks under the revised Coalition NBN plan. The contract value has had a $2.4 billion uplift based on Telstra’s ability to continue operating its hybrid fibre coaxial (HFC) network for broadband services.

CommsDay estimates that NBN would be paying Telstra $2.9 billion a year in lease commitments by 2067, up from $1 billion in 2019.

The report shows how valuable telecommunications networks can be, and suggests companies with large fibre network assets such as Vocus Communications Limited (SX: VOC) and Amcom Telecommunications Limited (ASX: AMM) may have much more hidden value than may appear. TPG Telecom Ltd’s (ASX: TPM) acquisition of Telecom Corp of New Zealand’s (ASX: TEL) AAPT business looks like a cheap and very shrewd move.

Foolish takeaway

Tech/internet stocks may have been slammed in the past few days on valuation grounds, but the ‘real’ technology stocks with plenty of physical assets may be sitting on ‘hidden’ gold mines.

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Motley Fool writer/analyst Mike King owns shares in Telstra, TPG Telecom, Vocus and Amcom. You can follow Mike on Twitter @TMFKinga

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