Wednesday, October 20, 2010

NBN Plan Provides Certainty For Telstra Shareholders

As the federal election gradually recedes into a distantly faintly remembered past, the minority government is beginning to (excuse me) move forward with its legislative agenda. Today the Prime Minister has announced the reintroduction of legislation for the National Broadband Network. Specifically, the legislation will enforce the structural separation of Telstra, along with measures relating to access to telecommunications services, and consumer protection rules. It is an important component of the government’s plans to deliver high speed broadband to virtually every home in Australia. In doing so, it spells out the future for Telstra, and provides a level of certainty for shareholders.

In fact, if it’s done right, it will be good for Telstra shareholders who for the most part have been on a rollercoaster ride since the company was privatised more than a decade ago. The mums and dads who bought into the company, especially the later tranches, could be forgiven for feeling short-changed by a process which left them owning a piece of a company suffering from declining market share and increasing competition. Many believed that the privatisation process was flawed from the beginning, and that the company should have been structurally separated prior to the initial float in 1997, selling off the retail business, and retaining the wholesale network as a public asset. It’s ironic that the new NBN plan will achieve almost that exact arrangement.

Of course, whether the new network will itself turn out to be good value for money is an entirely different question.

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