An article in the Australian Financial Review today suggests a long-awaited deal between Telstra Corporation Ltd (ASX: TLS) and the government's NBN Co will not be completed until 2015.
Telstra CEO David Thodey told Fairfax: "What we're trying to find with NBN Co and the government is a staged approach where we can take milestones…We all want to move on but I think the reality is that some things are going to take a little bit longer."
The drawn-out renegotiation of its $11.2 billion contract with the NBN Co, will take longer than originally expected. The Coalition, which plans to build a fibre-to-the-node (FTTN) network, had previously said the deal would be completed by the middle of this year.
But it seems they're finding out just how tough it can be to work with Telstra.
Under the previous Labour government's network, the superfast fibre optic cabling would run directly to premises and allow a faster speed. However the latest FTTN network requires the use of Telstra's copper lines for the last part of the network, in addition to its pits and pipes.
Some experts have criticised the idea of using 100-year-old copper lines in a more superior and modern network. However it is also believed ordinary households and businesses won't have the technology capable of utilising its full potential, anyway.
But here's something to think about: When the Sydney Harbour Bridge was opened in 1932, the daily traffic was around 11,000 vehicles per day. It's now 160,000. But what would it look like now, if it were designed for the average traffic in 1932?
Should shareholders be concerned?
There are a number of complexities in the negotiations. Such as rival telcos like iiNET Limited (ASX: IIN) and TPG Telecom Ltd (ASX: TPM) wanting to build their own networks in high-density areas, ongoing service agreements and transition arrangements which must be settled before a deal can be struck.
However the government said previously that it will not adversely impact Telstra shareholders. Indeed, this is also echoed by Telstra's chairwoman, Catherine Livingstone, who said the company will work in the best interests of its shareholders. It's unlikely the new deal will render the company worse off.
What's more, the payments Telstra will receive from the deal – estimated by some to be worth up to $98 billion over the next 55 years – will enable it to remain king of mobile markets too, given the amount of free cash it'll be able to invest. Something Optus – owned by Singapore Telecommunications Ltd (CHESS) (ASX: SGT) – isn't happy about.
