conroy eyes purchasing telcos

This guy IS desperate. He now wants the NBN to have the ability to buy existing retail providers, and provide retail services direct.
Could this be his end game? Buy Telstra back?

In theory he could look at buying any Telco, but in practice there is only one that counts- Telstra. Telstra has the scale and customers and cash flow, to really make the NBN work. We all know that TLS is vital to the economics of the NBN. If shareholders dig their heels in and say no to rolling assets into the NBN, then the NBN is dead..and so is the political career of Conroy.So there could be the motivation to do this.

Buying Telstra now, makes sense. Now more than ever before, the buyers premium has been sucked out of it... and yet its cash flow remains robust. So from a purchasors point of view there is a great price being offered by the market, and as we all know the NBN needs those assets to do its roll out.

So what would the NBN be buying?

1 The existing copper network and pits and ducts. Without access to this infrastructure, the cost of rollout blows out. The NBN wants these assets to control costs and to speed up the roll out. There are lots of figures floating around as to what its worth. The buyer just wants the pits and ducts, the seller wants compensation reflecting the revenues from the copper network.

2. Customers and cash flow. The massive cash flow of Telstra would be a huge help to the NBN in terms of getting financed. The issue of whether the NBN could be privatised down the track would be taken away, the cash flow would go a very long way towards providing the sort of returns investors would require.

3. The worlds best wireless network. The spend on this is finished and is a major asset. The speed is able to be upgraded as was shown recently. With the NBN as owner of this network, this asset could easily be swung in to service the remote areas in lieu of the insanely expensive and financially impractical fibre.

4. Other assets- sensis and overseas assets. It is hard to see a role for these assets in the NBN stable, but they could find eager buyers and be sold off.


There are massive synergies here for the NBN. A current market cap of around 35 billion for TLS, supported by up and running cash flow of around 6 billion, compares extremely favourably to the hypothetical ifs and buts economics being proposed for the NBN on its own. As a bolt on aquisition it would make the NBN a definite proposition, compared to the uncertain concept that it is now. Conroy and Rudd are desperate to go to the elections with some results, this could be their answer, to getting a deal done .
Of course Telstra shareholders would have to be on board. If they felt that the govt was stealing their assets at too cheap a price then they (we) would not vote for it. But if a deal was structured correctly, telstra shareholders would be a able to share in the upside as the market re rates the embedded telstra cashflows in the nw company