share price, page-18

A very good read from Huntleys IMO:

A new company will be established to build and operate a National Broadband Network (NBN). It is fair to say the structure of the $43bn NBN announcement surprised all. The change from fibre-to-the node (FTTN) to fibre-to-the-premise (FTTP) immediately drew a conciliatory reaction from TLS bringing it back into the loop from which it was divorced by the Independent Panel of Experts in November. The final outcome will take many months to formulate as parties enter a consultative process. Many parties will be involved with positive and negative implications. The scenarios being floated are all guess work at this stage. Consequently TLS shares will probably range trade - $3.10 to $3.50 - for possibly up to six months. The NBN announcement does not impact the financial guidance of TLS for FY09 and FY10. Beyond that there is speculation and guess work. What does seem anomalous is that the delivery of high-speed broadband to 90% of the population will take eight years – high speed but slow delivery. With apologies to our Tasmanian subscribers, the NBN roll out starts in Australia’s economic growth and nerve centre – Tasmania. Don’t forget Telstra’s major corporate and government clients already have high speed fibre broadband services. Why $43bn and eight years? Hopefully both cost and roll out time will be significantly reduced. It can and should be providing the consultative process is successful with common sense commercial realities winning out. The time for politics and corporate brinkmanship are past. The FTTP NBN would cost $43bn and take eight years if Telstra’s copper wire network was completely bypassed and duplicated by a fibre network - duplication on a massive scale that Australia cannot afford. The government compared the proposed NBN and speeds to those available in Japan, Korea, Malaysia and Singapore. These are high density, small land mass countries. The tyranny of distance will win. A duplicate network would require the digging up of every street and footpath in metropolitan and regional Australia with the exception of those regions to be serviced by satellite and wireless. That would take eight years. What about the environmental damage and heritage restrictions? Don’t tell the Greens but tree die back due to root damage would be significant as was the case in Greater London when their network was laid. Gas and water pipes? The common sense solution would be for the government to engage/subcontract the building of the FTTP NBN to TLS. TLS would pull fibre through the existing conduits and ducts housing the copper wire network while extracting the old copper wire. At current copper prices the copper content could be worth at least $200m. NBN Co. would compensate TLS for access to these conduits/ducts – a capital return/special dividend? The saving would be billions in dollars and years in time. That gets the infrastructure issue out of the way for a saving of perhaps $20bn. Will common sense or ideology prevail – surely common sense? The government could force TLS into a ‘Participate or Separate’ situation. You can hear the competitors cheering already. Without spending a penny they will get access to NBN on the same basis as TLS just as they get access to the TLS copper network without spending a penny of their shareholders funds on building and developing a network. What happens to the existing HFC networks owned by TLS and Optus is up for discussion. Telstra’s HFC network passes 2.5 million homes in metropolitan Australia. It announced an upgrade to the Melbourne network passing one million homes to lift peak download speeds to 100Mbps for a cost of $300m by December 2009. The Tasmanian roll out of NBN will probably cost more, pass fewer than 200,000 homes and will not be ready by December 2009. We will continue the great NBN discussion as more information comes to light. It would be a brave or stupid government to walk away from a potential massive cost saving just to stick it up Telstra.