accc could deal t3 a heavy blow

from smh.com.au


Malcolm Maiden
October 16, 2006
Page 1 of 2 | Single page

BOND STREET




AUSTRALIAN Competition and Consumer Commission chairman Graeme Samuel has begun preparing a speech that will significantly affect the Government's $8 billion-plus T3 Telstra share selldown.

In it, he will give the first insight into whether the commission is inclined to buy the argument being mounted by Telstra's main competitor, Optus, that Telstra should give other telecoms access to its new $1 billion "Next G" 3G wireless broadband network.

The new national "3G" Next G network was switched on by Telstra chief executive Sol Trujillo on October 6 during his annual strategic briefing and is a crucial element of the profit recovery he is banking on.

Telstra earlier this year conceded that it should give competitors access to a planned fibre-to-the-node land-based broadband network which would have physically replaced sections of its old copper wire network, and used the final metres of the copper to reach individual houses.

Telstra suspended the fibre roll-out after failing to negotiate a fibre access pricing regime with the ACCC and is now relying on the new 3G wireless network to build market share, revenue and profit momentum.

It intends to convert existing mobile telephone customers over to the new 3G broadband network - the existing CDMA national mobile network will be turned off as part of that plan in about January 2008 - and attract new users, including laptop computer users, who can access the 3G network by using a special external card. But the plan hinges on its assumption that the 3G network will not be piggy-backed by competitors, as its old copper wire network is.

Its argument for exclusivity on the wireless network is much stronger than the one it ran briefly on the fibre network. But the argument Optus is mounting in favour of access to the new network also has merit, and Samuel's comments in about a week's time are going to be crucial, for the question of access and, therefore, Telstra's profit prospects and the price investors are prepared to pay in T3.

Telstra flagged the issue in the T3 prospectus, saying that it was open to the ACCC to hold a public inquiry at any time into whether "compulsory competitor access" to the new 3G network should be required.

It said an access regime for the new wireless network was not justified, "because of the wide availability of competing wireless networks" - Optus has a joint venture 3G mobile network in the capital cities, with Vodafone, and Hutchison built the first 3G network in Australia - and if the ACCC did allow competitor access, Telstra would lose the benefits exclusivity carried, a development that would "materially adversely affect its business and shareholder returns, including dividends".