Telstra shares touched a new low yesterday after the company released a letter to shareholders in which it raised more questions about its talks with the government over the National Broadband Network.
The shares hit $2.88 during trading, before recovering to close at $2.93, down 1c on the day.
That was a new closing low for the stock.
The company’s shares have been under renewed pressure since the interim profit announcement last month and the lack of any movement on finalising the NBN discussions with the government.
In the letter Telstra claimed that draft laws for the government’s national broadband network company NBN Co could create a retailer rather than a wholesale network provider.
The legislation states NBN Co is to be a wholesale-only company but it gives the communications minister significant powers of discretion to allow it to conduct retail services.
"Such an outcome would run counter to the core purpose of the NBN and the government’s primary policy objective of restructuring the industry to have separate providers for retail and wholesale fixed network services," Telstra chairman Catherine Livingstone and chief executive David Thodey said in the letter.
"We are very concerned about this potential change in the government’s position."
On February 24 the Federal government released draft legislation that would govern how NBN Co is operated and regulated.
The draft laws allow NBN Co to offer services directly to certain end-users and to purchase other communications companies even if they have retail businesses.
This could allow NBN Co to compete directly with retail providers such as Telstra and Optus that would be buying its wholesale services.
"If enacted, we would need to factor this into the financial consideration required to achieve an agreement that is in the company’s and your best interests," Telstra said of the legislation in its letter to shareholders.
Telstra also said that its position on the Telecommunications Legislation Amendment Bill 2009 had not changed.
"We have always said this legislation is likely to destroy shareholder value and makes an agreement with NBN Co and the government harder to achieve."
Telstra is negotiating with the government and its NBN Co on the implementation of the $42 billion high-speed broadband project, which could see some of Telstra’s infrastructure integrated into the network.
"As you know, the NBN negotiations are extremely important for Telstra," Telstra told shareholders.
"We remain engaged with the Government and NBN Co; we also remain committed to trying to find a mutually acceptable outcome.
"There are several complex issues about which we await clarification from the Government and NBN Co.
"However, these commercial discussions cannot be divorced from the current legislative risks your company faces."
The government is committed to breaking up Telstra’s retail and wholesale arms in an effort to introduce greater competition into the telecommunications sector.
It has said that it will force the Telco to sell its half of Foxtel.
"Telstra’s position on this Bill has not changed: while we support the Government’s National Broadband Network (NBN) vision and sensible reforms for our industry, we have always said this legislation is likely to destroy shareholder value and makes an agreement with NBN Co and the Government harder to achieve."
