NBN Co and Telstra Sign Binding Definitive Agreements

NBN Co and Telstra Sign Binding Definitive Agreements

Transaction Enables More Efficient Rollout of the National Broadband Network for All Australians

• Milestone agreements enable NBN Co to roll out the National Broadband Network more efficiently, with greater certainty over its cost base and with reduced disruption to the community
• NBN Co to access Telstra infrastructure over a minimum 35-year period, reducing duplication and enabling efficient use of existing infrastructure
• NBN Co given greater certainty over revenues as Telstra, Australia's largest retail telecommunications provider, agrees to a fixed-line network preference in favour of NBN Co for wholesale fixed line services
• NBN Co to pay Telstra progressively for the disconnection of customers (other than HFC pay-TV customers) from Telstra's legacy fixed-line networks
• Interim arrangements negotiated for immediate access to Telstra infrastructure to accelerate network deployment
• Total payments over time are estimated to deliver approximately $9 billion in June 2010 post tax net present value to Telstra
• Definitive Agreements reached with Telstra are financially beneficial to NBN Co as reflected in the company's Corporate Plan of December 2010

Thursday, 23 June 2011 -- NBN Co Limited ("NBN Co" or "the company") announced today it had signed binding Definitive Agreements with Telstra Corporation Limited ("Telstra"), subject to certain conditions including shareholder and regulatory approvals, which facilitate the efficient rollout of a high speed National Broadband Network for all Australians.

The landmark transaction has three key components that make it beneficial to NBN Co, Telstra and the Australian taxpayer:

1. It grants NBN Co access to Telstra facilities and infrastructure over a minimum period of 35 years, ensuring that the fibre optic component of the National Broadband Network, serving 93% of premises, can be rolled out efficiently and avoids duplicating infrastructure;
2. It provides for the progressive disconnection of Telstra's copper and Hybrid Fibre Coaxial (HFC) customers (other than HFC pay-TV customers) and NBN Co will be Telstra's preferred fixed-line network;
3. In addition, NBN Co and Telstra have negotiated interim arrangements for immediate access to Telstra infrastructure.

In order to meet the Government's requirement to stimulate competition in the retail telecommunications market, there will be no special pricing or volume discounts for wholesale services included in the agreement with Telstra.
Welcoming the Definitive Agreements with Telstra, NBN Co Chairman Harrison Young said:

"This transaction paves the way for improved broadband access for all Australians. It is beneficial to NBN Co and we believe to Telstra and most importantly it will deliver the improved telecommunications infrastructure that is vital for Australia's future.

"The Definitive Agreements are a significant milestone for NBN Co in delivering on its Corporate Plan and represent the conclusion of nearly two years of detailed negotiations. They support NBN Co's ability to achieve its targeted take-up of services and projected financial returns."

Mike Quigley, NBN Co Chief Executive Officer, said:

"We've taken considerable time to reach today's agreement. But it has been worth the wait. It means we can build the NBN more cost effectively and with less disruption and greater certainty than had we duplicated Telstra's existing infrastructure.

"This deal will bring about the efficient delivery of a standardised national broadband platform which will foster innovation in applications and services. Unquestionably it will be of lasting benefit to Australia."
Total payments over time are estimated to deliver approximately $9 billion in June 2010 post tax net present value to Telstra.

The Definitive Agreements reached with Telstra are financially beneficial to NBN Co as reflected in NBN Co's Corporate Plan of December 2010.

Under the agreement, Telstra will provide much of the infrastructure required to build the network including:

• Lead-in conduits through which the NBN fibre will be connected to each premise;
• Underground ducts and pits through which the NBN fibre will run;
• Dark fibre; and
• Rack spaces in Telstra exchanges

The fibre optic network will deliver peak speeds of up to 1 gigabit per second to a potential 93% of Australian premises. The remaining 7% of premises in rural and regional Australia will be served by satellite and fixed-wireless services enabling peak speeds of up to 12 megabits per second.

A summary of the Definitive Agreements is attached.