Telstra To Earn $3 Billion From NBN Deal

Telstra, Australia’s biggest phone company stands to earn up to $3 billion from the national broadband network (NBN) deal.

Andrew Penn, chief financial officer of Telstra, said that the company expects to get $2-3 billion in the next three years, thanks to the rollout of the NBN project. He said the payments and benefits will offset the decrease of free cash flow from the fixed-line business.

This, however, is short-term because free cash flow will likely increase in the next two years as a result of the timing of NBN financials.

Penn added that the company plans to return the capital to its shareholders through franked dividends. He cautioned, however, that dividends are unlikely to increase before 2014.

The national broadband network project is an initiative of the Australain Federal Government, which aims to provide high-speed broadband connection to all Australians. The project involves rolling out of a fibre network to 93 percent of Australia’s premises.

NBN, a government business enterprise, is tasked to build and maintain the network. The project is expected to be completed by 2012.

Telstra has been involved with the NBN project when it reached an agreement with the Federal Government and NBN Co. for the rollout. Under the agreement, NBN Co. will use and pay for access to Telstra’s infrastructure.

Telstra’s involvement has been approved by the Australian Competition and Consumer Commission and Telstra’s shareholders through a voting process. The company and NBN Co. signed a Wholesale Broadband Agreement, which will end on Nov. 30, 2012.

Tagged Andrew Penn, NBN, Telstra