Telstra’s participation in the national broadband network (NBN) moved a big step forward when shareholders said yes to the telco giant’s deal with the federal government.
Overwhelming shareholder approval at Tuesday’s annual general meeting left only Telstra’s discussions with the Australian Competition and Consumer Commission (ACCC) for the proposed $11 billion transaction to be completed.
Telstra chairman Catherine Livingstone took questions on the NBN for almost an hour, and listened to many mum-and-dad shareholders criticise the federal government’s treatment of the once state-owned company in relation to the NBN.
Ms Livingstone reminded shareholders the vote was not on the merits or otherwise of the government’s decision to build the $36 billion network.
“This is a vote about whether Telstra is better off implementing the proposed transaction regardless of what happens to NBN,” Ms Livingstone said.
“Implementing the proposed transaction does not in any way inhibit our ability to discuss with a subsequent government or the current government any change in policy.
“It in fact gives us more options, not fewer options.”
In the end, some 99.45 per cent of votes were cast in favour.
Shareholders also approved the remuneration report, with 96.8 per cent of votes cast for the re-election of Ms Livingstone and director Jon Mullen.
Telstra shares gained 0.64 per cent, or two cents, to $3.13 on a day the broader market fell two per cent.
Under the deal with the federal government and NBN Co, Telstra will progressively decommission its copper-based network and allow NBN Co to access its pits, manholes and exchanges, and sell some infrastructure.
In return, Telstra will receive $11 billion from the federal government, with the financial benefits to come over a 30-year period.
NBN Co is the government-funded company charged with building and operating the network.
Independent advisory firm Grant Samuel concluded in a report that the deal was the best possible outcome for Telstra shareholders, as it added $4.7 billion to the telco’s value.
The ACCC is reviewing Telstra’s structural separation undertakings (SSU) and is yet to issue a ruling.
The regulator did say in August however that it could not accept a crucial aspect of the SSU, saying the telco had no compliance plan for its commitment to structurally separate its retail and wholesale arms from 2018.
Ms Livingstone said Telstra was in ongoing, productive negotiations with the ACCC.
Outgoing Telstra chief financial officer John Stanhope said the company would submit a revised SSU in the coming weeks.
“I would remind you that the ACCC chairman, Rod Sims has commented that he thinks the issues with the SSU are not insurmountable,” Mr Stanhope said.
“We too believe the issues can be resolved.”
Ovum research director David Kennedy said he expected a resolution by the end of the year.
“Failure by Telstra to conclude an SSU by 31 December 2011 would activate the statutory requirements for a compulsory functional separation,” Mr Kennedy said in a research note.
“The terms of functional separation can be imposed at the Minister’s discretion after advice from the ACCC, and would most likely to be onerous.”
Ms Livingstone said the board would consider a share buyback and was committed to pay a fully franked 28-cent-per-share dividend in both 2011/12 and 2012/13.