allan kohler usually knows what is going oncheck out this...

allan kohler usually knows what is going on
check out this article
my reading of is that telstra gets to sell the NBN and take procedes in an IPO
but it is not clear
read it yourself, particularly the last three paragraphs
v
v

The negotiators finally got to an eleven-figure number - $11 billion - late last night, thanks to the government kicking in $2 billion.

And the relief in the Prime Minister's courtyard this afternoon, on this bright, cold Canberra day, was toasty warm.

Reading left to right there was Mike Quigley and Harrison Young, CEO and chairman of the NBN, Finance Minister Lindsay Tanner, Prime minister Kevin Rudd, Communications Minister Stephen Conroy, and then Catherine Livingstone and David Thodey, Chair and CEO of Telstra. The pollies beamed and did the verbal can-can; the NBN and Telstra folk looked, and no doubt felt, like members of the chorus line.

The PM, in particular, positively gushed - at last a good story to tell. When it was her turn to speak, Telstra chair Catherine Livingstone, however, was a little less effusive, saying it was an "encouraging milestone" and that they were all "a step closer", and I imagine those to her right were thinking she could at least show a little more gratitude for getting 11 billion smackers.

Those who have been actually negotiating this deal for nine months, and who will now get some sleep, were a lot more enthusiastic. They had got $9 billion out of Mike Quigley and Harrison Young, but it wasn't enough - they needed the government to come to the party so they could come up with a figure that would get past the board.

That crucial $2 billion put in directly by the government is partly extra cash for the Universal Service Obligation (USO) and partly a subsidy to retrain Telstra's copper workers to be fibre workers, so they don't have to be sacked. Without it, the deal wouldn't have happened.

It is real money: the government has agreed to pay up to $100 million a year for retraining and an extra $50 million or so for the USO. The net present value of that over 25 years is $2 billion.

But is it justified? Well, mostly. Telstra has been getting underpaid for the USO and whether $100 million is reasonable for teaching a few thousand staff to deal with fibre instead of copper - who knows?

But it got the deal done, and it avoided a fight with Telstra like the one with the global mining industry. In the circumstances there was no choice - Australia's superannuants would march on Parliament House with lit torches if Mr Rudd robbed both Telstra and BHP.

The other $9 billion comes out of NBN Co's budget and is split roughly $5 billion for renting access to Telstra's ducts, pits and conduits and $4 billion in cash payments to Telstra for "migrating" its customers.

It's not exactly migration, though - just Telstra progressively switching its business from internally supplied network services to the NBN. Why is it getting paid about $4.5 billion to do this? Because it's a big ugly potential competitor that drove a hard bargain.

So there it is - Telstra gets to announce a number that's closer to what it wanted ($12 billion) than what the government and the NBN Co wanted to pay ($8 billion) and David Thodey and his team can now get on with transforming Telstra into a structurally separated service company.

That transformation will be incredibly difficult, and may not be successful, but at least Telstra will have one big advantage over its competitors: every time it moves one of its customers from copper to NBN fibre, it will get a cash payment. No one else, presumably, will get that.

It's clear from my discussions today with those involved in the negotiations that valuing this component of the deal was the most difficult and took the longest.

They call it a "de-commissioning" payment. No one would tell me today how it is calculated - whether it is based on each customer's monthly spending, or whether it's a standard bounty per customer - but if it was that complicated it must be the former.

As for the rent to be paid for access to ducts, pits, conduits and space in the exchanges - there is an easy way to find out whether it's really worth $5 billion: simply float the infrastructure as an IPO with an annuity income stream from the NBN.

After all, it will have to be valued by an independent expert before going to shareholders for approval, and there is not much point in the new Telstra owning it, simply to collect rent from a government business enterprise.

So, next step: a $5 billion IPO of Telstra's ducts and pipes? Only if someone wants to know the true market value of today's deal. I'm guessing they might not want to know