Telstra will be almost $5 billion better off under its structural separation plan than if it competes with the National Broadband Network (NBN), according to an independent analysis.
The finding is included in a 185-page explanatory memorandum on Telstra’s deal to co-operate in the rollout of the NBN, sent to its shareholders on Thursday ahead of their required vote on the issue.
Independent advisory firm Grant Samuel concluded that the deal was the best possible outcome for Telstra shareholders, as it adds $4.7 billion to the telco’s value.
That equates to 38 cents per Telstra share.
In its report, Grant Samuel said the implementation of the NBN would strip $11.6 billion from Telstra’s cash flows and revenue.
But that would be more than covered by the eventual value of its transaction with the federal government and NBN Co, estimated by Grant Samuel to be $12.8 billion, plus $3.5 billion in costs avoided by not competing with the NBN, the firm said.
NBN Co is the company established to roll out the NBN Network.
Even if there was a change of government and the NBN contract was terminated, Grant Samuel said Telstra would still better off by structurally separating.
“Telstra shareholders are likely to be better off if they approve the proposal than if they do not,” Grant Samuel said.
The findings differ from the view of Telstra’s board, with chairwoman Catherine Livingstone telling shareholders in the memorandum that the NBN will result in a net loss of value for Telstra.
Chief executive David Thodey said the financial benefits of Telstra’s deal with the government were fair given the amount of value shareholders had lost since the telco was privatised.
“You’ve got to look at the total story of what shareholders have had to go through to look at any evaluation story or conversation,” he told journalists.
“I think it is a fair consideration.”
Telstra shares gained three cents, or 0.99 per cent, to $3.06 on Thursday.
Under the deal, which is yet to be approved by the Australian Competition and Consumer Commission (ACCC), Telstra will separate its retail and wholesale operations by 2018.
It will be paid about $4 billion to disconnect customers from its old copper network and for the sale of some of its infrastructure.
Telstra will receive a further $5 billion over 30 years to allow NBN Co access to its exchanges, pits and manholes.
Another $2 billion in estimated value comes from contributions and cost savings made through new government policy commitments.
The ACCC said this week it was worried Telstra had no compliance plan for its commitment to structurally separate, while the telco’s undertaking did not address legislative requirements.
Mr Thodey on Thursday said the ACCC’s views did not come as a surprise, and he hoped to resolve the issues through consultations.
Telstra wants its separation undertaking accepted before its annual general meeting on October 18, when shareholders will vote on the plans, but says the vote may still go ahead if acceptance is not received.
