Telstra has embarked on a major restructuring as it gears up to purchase the National Broadband Network (NBN) from the Australian Government:
The restructure involves creating three separate legal entities under a Telstra Group umbrella, which Mr Penn and Telstra chief financial officer Vicki Brady said could theoretically be spun off as separately listed companies, or sold in the future…
[Penn] told The Australian Financial Review, it was in part designed to make it feasible for the company to buy the NBN off the government in future.
“That is not the only thing motivating it, but the government’s policy has always stated that the NBN could not be owned by a vertically integrated operator, so InfraCo would have to be demerged effectively”…
Rival telecommunications companies have responded angrily, arguing a sale to Telstra would harm taxpayers, competition and consumers:
Optus’ vice-president of regulatory and public affairs Andrew Sheridan said Telstra had already gleaned huge financial rewards from agreeing to relinquish its infrastructure dominance to the NBN, and that a spun-off Telstra division would not be sufficiently independent to prevent the kind of lopsided commercial agreements that existed before NBN’s inception.
“I think it would be a terrible outcome for Australian taxpayers, competition and consumers to think that we can somehow allow Telstra to buy back the NBN, when that would effectively shred 10 years worth of competition policy,” Mr Sheridan said…
Of five rival telecommunications companies spoken to by The Australian Financial Review since Telstra’s announcement, only Aussie Broadband welcomed the idea.
The Herald-Sun’s Terry McCrann has also slammed the idea, describing a sale to Telstra as “astonishingly stupid” and “vandalism on a national scale”:
The NBN… is the single most important foundational infrastructure for the Australia of the 21st century.
It must remain publicly owned.
Apart from anything else, otherwise we would get into exactly the same sort of mess — but worse — that we had by selling Telstra into the private sector with its monopoly core (20th century) telco infrastructure…
That’s “pre-plague”; it made no sense to sell the NBN.
Now it makes even less sense and indeed it tips all the way over into national vandalism, because of two things: The reality of near zero interest rates and massive and all but permanent budget deficits.
Whether the government lends money to the NBN or “invests” equity capital into it, the actual reality is that all such money will be borrowed, be part of the budget deficit, and add to the government debt which as we know is headed to $1 trillion, then $1.5 trillion and still going.
Talk about being penny wise and pound foolish: let’s sell it for — $20bn? $50bn? — so that when the debt was going to hit $1 trillion it’ll only be the (more likely, on a $20bn sale) figure of $980bn.
And instead of $1.5 trillion, only $1.48 trillion. Whoopee!..
Enter interest rates. The government can borrow the, say, $50bn to fund the NBN at 1 to 2 per cent, depending on term and maturity and timing.
So the cost to the taxpayer of hanging on to our most important national asset is $500m to $1bn a year.
As I said, it would be vandalism and utter, utter stupidity to sell it and “pay off” an utterly insignificant amount of debt…
Indeed, the government — we — get a much better return on $50bn borrowed for the NBN than $100bn borrowed for JobKeeper.
Too right. One of the reasons why the NBN is so expensive is because Telstra received $11 billion in instalments from taxpayers in exchange for its fixed line customers migrating to the NBN.
This deal was struck by the Gillard Government in 2011 in a bid to fix the structural mess created when the Howard Government privatised Telstra in the late-1990s, which created an integrated vertical monopoly by handing Telstra control of both the wholesale and retail fixed line networks.
To sell Telstra the NBN would be a case of history repeating by creating another vertically integrated monopoly, damaging competition, taxpayers and end-users. The Coalition must not make the same mistake twice.