Broadband Bidders Need Telstra Hostile Senate To Play A Key Role

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Telstra took another savaging on Australian and US stockmarkets yesterday, with investors carving another 11 cents, or 3 percent, from the share price. The big selloff has stripped more than A$9 million from Telstra’s market cap in two days. However analysts are saying that whoever wins the bid they are at some stage going to need Telstra or a Senate that will support a change in legislation.

The shares crashed to a two-year low of $3.54 ­ apparently reflecting a belief that Telstra’s exclusion from the national broadband network tendering process could endanger its monopoly in the fixed line market for both voice calls and broadband.

And that belief also raised speculation that if another tenderer is chosen to handle the NBN build, a truculent Telstra might attempt to refuse to allow the newcomer access to the copper lines running from its nodes to homes and offices.

David Kennedy, research director of research consultancy Ovum, says the eventual winner of the bid will have to convince Telstra to allow access to its copper network.

“I could think of half a dozen things they could do that would be quite destructive of any business case that an alternative operator might have,” he told ABC Radio yesterday. “What no one in the process has explained yet is how they are either going to get Telstra on board with that or get them out of the way.

“Until these other operators can explain how that’s going to happen I don’t think we can have a lot of confidence that they’ll be successful.”

Plainly, ensuring access would require new legislation, and the Rudd Government might strike trouble in forcing that through a hostile Senate.

 

 

Telstra CEO Sol Trujillo has signalled that in any case Telstra is likely to fight back by building its own NBN ­ which it would be able to do much faster than any of the other three national bidders ­ and probably won’t hesitate to go all the way to the High Court in seeking to have its right to do so recognised.


Shares are tipped to slide further.

“We will continue to focus on providing services to our customers, including our high-speed wireless broadband, our fixed broadband via ADSL or HFC cable networks. We do have lots of options for future high-speed broadband delivery,” Trujillo said. “We reserve our rights regarding future action. It is too early to rule anything in or out.”

That may cut little ice with the shareholders, if the share price keeps heading south. JP Morgan telecoms analyst Laurent Horrut has forecast a possible $1.32 hit to Telstra’s share price if it fails to get a slice of the broadband network process. That would see the share price drop to the $2.20 level ­ by far its lowest since being floated.

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