Tuesday, April 27, 2010

NBN Madness (amended)

I normally have a lot of time for Alan Kohler, but his comment today on Telstra seems to reflect that any long consideration of telecommunications policy will in the end lead to madness.

In this piece he begins by noting the obvious - that the price the NBN is prepared to pay for Telstra co-operation and the price that Telstra is prepared to accept for that co-operation are a long way apart.

He then, however, progresses the theory that Telstra's shareholders bought the business assuming "that it included a network that would be viable for at least 25 years". If there really are any such investors I want to meet them - I have a bridge I want to sell them. Most importantly the T3 investors knew it NOT to be the case. Telstra delivered to its principal shareholder in July 2005 (subsequently released to all in August) that outlined their plan to replace most of it, for which they argued they needed regulatory concessions.

The full plan was released in November with a rider on "regulatory certainty". That request wasn't for NO regulatory change, it was for regulatory change biased in Telstra's favour.

While it may be true that the Government can make a political decision to make transfer payments of taxpayer cash to anyone they care to - including filling this gap in the valuations - actually doing so is another matter. The 10 million voters who are NOT directly shareholders in Telstra would take a very dim view. More importantly those 10 million voters are probably more inclined to change their vote on the basis of an irresponsible action than would any of the 1.4 million shareholders.

I don't think the PM needs to consult his pollsters too closely. Remember, NBN Cos point of indifference is the value to them of having the Telstra assets (ducts and customers) - at that price they are just as happy to go it alone. Rudd doesn't need to close the gap therefore to make the NBN happen.

Why would he anger 10 million voters to thrill a mere 1.4 million.

Note: I bought Telstra shares in all three floats. like the dividends, I just wish management would hurry up and realise the value of structural separation.

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