Telstra cans cable network in regulatory spat

Doubt cast on sell-off

By Chris Williams • Get more from this author

Posted in Telecoms, 7th August 2006 12:30 GMT

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Telstra has confirmed investor fears and announced its talks with Aussie regulators, aimed at paving the way for a AUS$3.1bn (£1.2bn) high speed fibre network, have collapsed.

A statement from the telco said:

The major stumbling block was the ACCC’s unwillingness to recognise the actual costs that Telstra incurs in providing its services and, especially, the costs it incurs in providing services to rural, regional, and remote Australia. Until Telstra’s actual costs are recognised and the ACCC's regulatory practices change, Telstra will not invest in a fibre-to-the-node broadband network.

Read the rest of the statement (.pdf) here.

The Australian Competition and Consumer Commission said it was "perplexed" by the decision. Chairman Greame Samuel said: "The ACCC notes that the calculations which Telstra has provided, to date, on the costs of services on its existing network have been based not on its actual costs or its regulatory accounts, but on Telstra's own highly contentious economic model." Their statement is here.

A deal was viewed as key to Telstra's attractiveness to potential buyers of the Australian government's remaining 51.8 per cent stake. As we reported in April, investors were already getting twitchy about the talks, with Telstra shares at an all-time low. They fell again on today's announcement.

The failure to reach a deal leaves Australia with no plan to replace its aged national copper network.

ABC News reports that opposition communications spokesman Stephen Conroy described the news as "an absolute disaster".

Communications Minister Helen Coonan responded: "What we'll do is we'll have a look at it and see what the situation is. I think this is an opportunity for us all now to take stock and to let other competitors have a look at what they can do." ®

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