It may cost $43 billion, plus inflation over the next 8 years, the down payment might be $4.7 billion, but the Rudd plan for a countrywide broadband network has made Telstra shareholders, including The Future Fund and through it the taxpayers of this country, more wealthy this morning.
How long that will last is open to question, but the 4.3%, 14c rise from $3.21 on Monday night to $3.35 at the close yesterday, did take the eye and was contrary to what commentators and analysts were saying would happen.
By common agreement the announcement, and news of a review of telecommunications competition policy, was seen as being anti-Telstra. And yet more than 268 million shares were traded in a huge day of business in the stock.
More than 125 million were traded in the first two hours of trading after the government made its surprise announcement at 9 am.
But the company said the announcement won’t impact on its the financial results for the next 18 months and other investors saw it as an opportunity for the Telco to deal itself back into the broadband game.
Telstra shares have been as low as $2.99 two weeks ago as investors fretted about the loss of presence in the government’s broadband plans.
Telstra issued a conciliatory statement about the plan and the review of Telecoms regulation, that the federal government also revealed at the same time.
The first paragraph was very different to some more recent Telstra utterances on these sorts of issues, especially from the chairman.
"Telstra today welcomed the Government’s announcement about its proposed $43 billion new national broadband network (NBN)."
No attack, now criticism, as we have been used to from the American management under CEO Sol Trujillo.
There was more in the same, changed vein.
Telstra Chairman Donald McGauchie said: “We look forward to having constructive discussions with the Government at the earliest opportunity. There is a lot to absorb in the Government’s announcement and we will consider every aspect in detail.
“Senator Conroy has said today that the Government does not have a pre-determined view on regulatory matters. Telstra welcomes the opportunity to provide input on the regulatory reform discussion paper.
“Telstra has publicly advanced the need for high-speed broadband for a number of years and shares the Government’s strong desire to make high-speed broadband widely available to all Australians as a key enabler of economic growth and social development.
“Telstra supports the Government’s objectives of investment in world-leading broadband infrastructure, an innovative telecommunications sector and healthy competition that provides real choice for customers.
“We will work with the Government to assist with the implementation of its strategy, but will remain at all times committed to ensuring the best interests of our shareholders, employees and customers.
“The new NBN will have little short- to medium-term financial impact on Telstra’s business as it would take at least eight years before it is completed.
“This announcement does not change our forecasts or our guidance for financial years 2008-2009 or 2009-2010,” Mr McCauchie said.
Telstra shares had fallen more than 20% since it was excluded from the NBN plan late last year.
But yesterday they jumped to a day’s high of $3.40 in the afternoon after peaking at $3.37 before lunch. Clearly there were no second thoughts on the day as the shares rose into the afternoon.
It was as though punters were saying Telstra was a winner, but that’s hard to see at first glance.
In the market there was surprise and scepticism, with Goldman Sachs JBWere pointing out that initial reaction from big investors was not favourable.
As well, the Federal Opposition said it would not commit to supporting the plan and to passing legislation in the Senate.
On top of this is the suggestions in the proposed new regulatory regime, that telstra might be given a much tougher time and be forced to divest its 50% of Foxtel and its HFC cable system in most major capital cities.
The fibre-to-the-premise network will run to 90% of Australian homes and businesses.
The government will make an initial investment of $4.7 billion in the company but intends to sell its interest within five years after the network is fully operational.
It will be a major competitor for everyone in communications, from Telstra down to the smallest content provider.
Pay TV groups like Foxtel and Austar will need to take heed and get on board in some way, Free To Air TV networks such as Seven, Nine and Ten and the government duo, the ABC and SBS, will need to be involved some way.
Fairfax and News Ltd will have to join otherwise a national broadband network could make their existing offerings and business models redundant and look ageing and loss makers.
The government says it will seed the $43 billion and kick it off, with contributions then sought from the investment community and investing public.
"The network will be funded from Aussie Infrastructure Bonds while private sector investment in the new company will be capped at 49%," the statement said this morning.
Those infrastructure bonds have been discussed for some months and originally there was talk that some state governments were interested in going down this route, but nothing happened.
The bonds will be marketed heavily to Australian investors now shy of returning to the sha
