Telstra takes aim at NBN winner despite lost billions

Speaking at a Citigroup conference in the United States, Telstra chief Sol Trujillo ended weeks of speculation over the cost of the telco’s sudden exclusion from the project.

“We’ve had some people talk about the fact that we might lose $4 billion of profits [or] 40 percent of our profits,” said Trujillo.

“Rational analysis would suggest that at most a mid single digit percentage of revenues or perhaps $1 to $2 billion may be at risk, and that is over an extended period of time because it takes time to build all this.”

Trujillo reiterated Telstra’s concerns over a rival consortium being awarded the contract, including whether or not they had secured appropriate financial backing and what he called ‘unresolved technical issues’.

He also watered down potential revenue opportunities from the NBN if it is built from rural areas out to the cities. The implication is that Telstra’s own losses from being excluded may be offset by the economics of the build methodology employed by a rival consortium.

“Rural wireline services are not intrinsically profitable,” said Trujillo.

“[The NBN] is likely to be low margin revenue with any third party build commencing first in the uneconomic rural areas.”

Trujillo conceded that ‘there is a risk we might see some slight market share erosion’ in rural areas from the NBN, but said ‘no one is going to take 100 percent of the market share’.

He also reiterated that any potential losses from the NBN exclusion would be further offset by Telstra’s ongoing investments in upgrades to its Next G mobile broadband network.

“We’ve already upgraded to 21Mbps and it’s our plans over the next year or year-and-a-half to take it at least to 42Mbps,” said Trujillo.

“So when you talk about getting up to broadband speeds of 12Mbps in an [NBN] RFP and you have a nationwide network that reaches 99 percent of the population that we’re generating already $20 more per month of average revenues per user and we’re expanding margins I would say that we’re probably in a good competitive position.”