Telstra, NBN Co talks under way

Telstra CEO Thodey says HFC network performing 'perfectly adequately'

Telstra seeks to maintain the value of its NBN agreement and “enhance regulatory certainty” in negotiations with NBN Co and the government, Telstra CEO David Thodey said today.

“We’re ready to assist the government in achieving its objectives to move to a multi-technology NBN rollout, but we’re very mindful of achieving our objectives,” Thodey said after Telstra revealed strong financial results for the first half of the 2013/2014 financial year.

Thodey also highlighted Telstra's continuing investment in its mobile and enterprise divisions during the telco's investor and media conference today.

Telstra, NBN Co and the government commenced talks a few weeks ago to renegotiate the $11.2 billion deal signed with the previous government, Thodey said. The CEO said he didn’t know how long the talks would take.

“We’re really driven by the government on [timing],” he said. “We’d like to get it done as soon as possible, as I’m sure the government would.”

“It’s just been the last few weeks that people got back from leave and have started the process.”

Thodey said his priorities for the talks included acting in the best interests of Telstra's shareholders, maintaining the value of its current agreements, and driving certainty of outcomes as soon as reasonably possible with an intent to enhance regulatory certainty.

“As for any additional role Telstra could play in the NBN build - for example doing more work in design and construction - we’re very happy to consider any opportunity should they become available and prove commercially attractive.”

Thodey said Telstra is open to incorporating its HFC network into the NBN under the multi-technology strategy that has been endorsed by the Coalition government.

“At the moment, under the current contracts, we will be closing that network by the end of the NBN rollout. Should the government want to keep it going, that will be a different commercial negotiation we will need to step through.”

Thodey beat back the idea that the telco’s HFC network is outdated or in poor condition.

“Let me be very clear about the HFC network that it’s in good, working condition,” he said.

“We only upgraded to DOCSIS 3.0 about two years ago, so I don’t know how it could be seen to be antiquated. It has literally millions of customers on it every day that seem to be very happy. The HFC network, I’m pleased to say, is alive and well and operating perfectly adequately.”

DOCSIS or the Data Over Cable Service Interface Specification is a standard for cable broadband and 3.0 is the latest version.

Telstra continues to build the transit network for the NBN with the goal of finishing it in the second half of calendar-year 2014, said Telstra CFO Andy Penn.

Telstra received $294 million from NBN revenue in the first half of FY 2013/14, Penn said.

“This included $136 million from the Commonwealth government agreements and other government policy commitments, $139 million from the infrastructure services agreement and $19 million in PSAA payments.”

PSAA payments are what Telstra receives each time a customer is disconnected from the copper network.

Investing in mobile, enterprise

Telstra executives said they hope to maintain Telstra’s large investment in mobile while also increasing the efficiency of its growing network, applications and services (NAS) business for enterprise.

Telstra spent $650 million on its mobile network in the first half of fiscal-year 2013/2014, said Penn.

In the last six months, Telstra reached its goal of bringing 4G services to 85 per cent of the population by year end and upgrading 1500 base stations to 4G. It now has 3500 4G base stations across Australia and 4 million 4G services.

“In looking at the technology roadmap for mobiles over the next two to three years, it’s very exciting,” said Thodey.

“We will see increasing speeds, better latency, better coverage indoors and also as we move to digital spectrum, greater coverage because you’re using a lower [frequency] band 700MHz spectrum.

“We’re very excited about the future of that network and if we can continue to invest at that level, I’d be very pleased.”

In the second half of the financial year, Penn said Telstra “will be further deepening our LTE coverage, investing in additional capacity and a number of other innovative trials in preparations for the Digital Dividend spectrum, which will become available in 2015.”

Telstra reported strong growth of its NAS unit, with revenue up 29.3 per cent in the half to $821 million.

“Revenue growth has accelerated due to the number of large contracts that we have signed in recent times, including with the Department of Defence,” said Penn.

Telstra’s NAS business also consumed two companies through acquisition – North Shore Communications and O2 Networks. The NSC acquisition added $17 million to revenue in the half, said Penn.

“We saw strong revenue growth across all major product categories, with cloud up 28.6 per cent, unified communications up 27.6 per cent and managed network services up 64.8 per cent,” the CFO said

Telstra added about 700 jobs in the NAS business alone, said Thodey. In total, Telstra added 888 jobs in the reporting period, he said.

However, Telstra isn’t about to sit back, said Penn. “We have more work to do to improve the efficiency of the NAS business and further improve margins.”

Adam Bender covers telco and enterprise tech issues for Computerworld and is the author of a dystopian novel about surveillance. Follow him on Twitter: @WatchAdam

Follow Computerworld Australia on Twitter: @ComputerworldAU, or take part in the Computerworld conversation on LinkedIn: Computerworld Australia

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