Telstra shareholders are being urged to vote in favour of the company’s structural separation plan, highlighting an independent report from research group Grant Samuel that states the company will be better off even if the National Broadband Network is eventually scrapped by a future government.
The move comes as the NBN has been thrust back into the spotlight, after the network was extended to Townsville earlier this week, while NBN Co. chief Mike Quigley has promised a timetable for future roll-outs before the end of the year.
Telstra chief executive David Thodey says the company could be $4.7 billion better off by passing the plan, than if it decided to compete with NBN Co.
”We think it delivers a better overall financial outcome, it does give us a more stable regulatory environment and more strategic flexibility,” Thodey says.
Investors are set to vote on the plan October 18. It comes after years of negotiation with the Government over its structural separation plan, and how the once government-owned entity will transfer its infrastructure over to the group.
The company’s annual report accompanied the Grant Samuel report, which stated that structural separation is in the best interests of Telstra and shareholders, even though there is a “significant degree of uncertainty” about the impact of the NBN, along with uncertainty about the political and regulatory environments of the future.
That uncertainty continues mostly due to the Coalition, which has said it will cease construction of the NBN if it gains power. However, due to a $6 billion termination payment, Grant Samuel says shareholders will be better off even if the NBN is scrapped.
However, if it doesn’t pass the plan, shareholders will not only lose out on payments for disconnecting infrastructure, but the company will be subject to legislation that will prevent it from bidding on new spectrum. It may also be forced to structurally separate in any case.
“It is likely that Telstra would face a more adverse regulatory environment if the proposal is rejected. Aside from regulation of the access pricing regime, various elements of the broader regulatory regime give considerable discretion to the minister,” it states.
If the proposal is accepted and the NBN terminated, Grant Samuel says Telstra will have received payments, will be able to bid on spectrum, and will have been relieved of its greenfield obligations.
“In summary, Grant Samuel believes that while the costs, disadvantages and risks of the proposal are not inconsequential, they are outweighed by the benefits and advantages, in particular the expected value gain.”
In the report, the directors have proposed shareholders vote in favour of the transaction, saying that it “is likely to offset part of the loss of value associated with the Government’s commitment to introduce the NBN and separate Telstra’s business”, and that it will deliver an overall superior result.
The report comes even though the ACCC said earlier this week it has some issues with the undertaking put forward by Telstra, and has recommended a number of changes. Telstra has said it believes these changes can be made.
The report comes after the Government announced the NBN had extended to Townsville, with 3,100 premises connected. The NBN Co. has said it has exceeded its target number of trial connections.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
