conroy playing a dangerous game

I am not sure that Conroy has thought this through.
Firstly I am hearing a lot more analysis which is promoting the idea that a seperated telstra will be a net positive for the company.

A spin off of the network assets would be one option, another would be to spin off say Sensis and Foxtel and the Bigpond brand , leaving the high growth broadband/mobile division as a pure telco play. Either way I believe value would be unlocked and shareholders would be rewarded. Whether the spinoff(s) would give rise to a capital return or to the issue of shares in the new company is an unknown.
The ability of the seperated entities to compete in an unfettered way would I believe result in the combined entities being significantly re-rated.

Should telstra proceed with the spin off of Telstra networks then telstra can then negotiate with the separated entity, become its most important and powerful customer. It may end up with a fantastic deal similar to the pioneering AFL clubs who moved to the new stadium (etihad stadium).
Effectively telstra networks would be in direct competition with the NBN but on a much lower cost basis. This would have dire consequences for the NBN
1. Loss of Telstra as a customer on the NBN -this alone would put the marginal at best economics of the NBN in serious jeopardy.
2. By providing a much lower cost alternative to the other companies , they will also look very closely at whether they need to join the high access cost NBN or go with the existing lower cost Telstra network. The mythical applications that the 3. Finally by taking itself out of the NBN picture , Telstra would be delivering to the potential NBN investors a real concern. Such investors cannot be bullied into making a decision to invest. It will boil down to their security of cash flows, and without Telstra customers underpinning nevermind competing with the network, this security will not be there. Conroy cant afford to ignore these investor concerns. Without them the government will have a huge funding gap. Remember we are not talking about small numbers here. The government needs to listen. If they dont then the electorate will make them.

The key to all this is to understand that Conroy is playing hardball now in an attempt to get telstra to blink and join the NBN. He hopes that the new management will cave in to joining the The timing is important, without a quick commitment from Telstra, he runs the risk of not having enough time before the next election, to get the funding issue squared away. It would be a major head ache for the Rudd government if the were going to the next election with an already bollooning national debt and some real concerns about how this major commitment will be funded on top of the other expenditures.

I personally hope as a shareholder that the new management team see the spin off option as a positive and not a negative.