A separated Telstra stands to score at least A$6 billion from the Rudd Government in return for its fixed-line assets, according to a Morgan Stanley report.
Despite fears currently being expressed by Telstra shareholders that their investment may be imperiled, the Morgan Stanley analyst team says the payment would outweigh costs of the separation, avoid government sanctions on Telstra for not cooperating and enable the company to focus on retail operations that sell services.
The analysts, led by Mark Blackwell, draw these conclusions in a note to clients issued on Monday, according to a Bloomberg report.
“It is clear to us that the NBN is likely to be a commercial failure without Telstra’s support,” Blackwell writes in the report. “As a result, Telstra is in a strong position to negotiate a payment for the strategic value of its fixed-line networks.”
An agreed split would allow Telstra to save the A$2 billion annual maintenance costs for the copper-wire platform, Morgan Stanley said. That’s more than double what the company is now paid by rivals who use the network for phone and Internet services.
“On our analysis, A$6 billion would be enough to outweigh the negatives of separation, which seems achievable,” Blackwell wrote. “This might not quite be the A$20 billion book value of the fixed-line assets, but would provide a substantial cash cushion to the final impact of NBN on Telstra.”
Morgan Stanley estimates service providers will pay about $40 a month per customer to access the NBN, compared with the $16 companies including Optus pay to tap into Telstra’s copper platform.
“This level of price increase, along with the capex savings, could easily swing the balance firmly in Telstra’s favour,” Blackwell said.