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Telstra tips assets into NBN Co

The AUD$11b break up it had to have

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Telstra has committed to the final step towards its pivotal part in the deployment of Australia’s national broadband network rollout, with the long anticipated finalisation of Definitive Agreements with the government and NBN Co.

The $AU11 billion deal will ensure the nations incumbent carrier’s pit-and-duct infrastructure will be used by NBN Co. Telstra customers will be transferred to the NBN infrastructure as it is rolled out, with Telstra retaining the retail relationship and receiving transfer payments from NBN Co.

Telstra and its shareholders will expect to see an annual $300 million windfall from the network asset deal. The first cash payment is expected to be paid this year but the overall $11 billion figure represents a a net present value and may fluctuate over time.

"The agreements are expected to also contribute to free cashflow generated in the medium term, provide us with greater financial flexibility and a stronger balance sheet, and help to offset the decline in free cashflow expected as customers migrate onto the NBN," said Telstra CEO David Thodey.

Under the arrangement Telstra will retain ownership of its Hybrid Fibre Coax (HFC) cable network and its 50 per cent share in Foxtel. Thodey who enthusiastically tussled with the government over the deal for three years said it was the best scenario compared with other realistically available options.

“This outcome should deliver a better overall financial outcome, a more stable regulatory environment and greater strategic flexibility, enabling Telstra to maintain a strong focus on our key areas of growth,” Thodey said. Telstra’s Structural Separation Undertaking (SSU), recently accepted by the Australian Competition and Consumer Commission (ACCC), had also come into force.

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