The National Broadband Network (NBN) is finally finished. Here’s why Telstra Corporation Ltd (ASX:T LS) might buy it back and spin it off.
The post The NBN is finally finished. Is Telstra (ASX:TLS) waiting in the wings? appeared first on The Motley Fool Australia. –
Those of us with longer memories (or perhaps just longer lifespans) might remember the origins of the National Broadband Network (NBN). It was first announced as an election promise back in 2007, upon which construction began shortly afterwards.
There have been many ups and downs since, as well as a seismic disruption to the telecommunications landscape in Australia – as shareholders of Telstra Corporation Ltd (ASX: TLS) would know.
In building the NBN, the NBN Co required Telstra’s old telephony network of copper wires and ducts to lay the infrastructure required to underpin of the new fibre optic cable. The impacts of this sale have been immense for Telstra shareholders.
Since Telstra could no longer both own a single national cabling network, and charge its competitors for the privilege of using it alongside it, the company is a lot smaller today than it used to be. Rewind the clock back to 2015 and Telstra was a company with a $6.60 share price, and about to pay an annual dividend of 32 cents a share.
Today, Telstra is a company with a share price of $3.01 (at the time of writing). Its investors have enjoyed just 16 cents per share in dividends in 2020.
But things could be coming full circle for Telstra.
Telstra calls NBN home
According to reporting in the Australian Financial Review (AFR), after almost 13 years, the federal communications minister has announced that the NBN is finally complete and “fully operational”. And that means that the NBN is one step closer to the government’s intended goal of privatisation.
According to the report, this declaration is one of 4 steps that the NBN will need to fulfil in order for a sale. The other steps reportedly include a lengthy Productivity Commission enquiry.
However, the AFR reports that, in a rather poetic turn of events, Telstra is the leading contender to buy the NBN back off the government when it does get the final green light for sale. There are likely to be competitors for the NBN such as superannuation funds.
But the AFR notes that any future owner that isn’t Telstra would have to pay up every year to keep using Telstra’s infrastructure, as the NBN does today. That means Telstra would be the only bidder without this handicap to overcome. As such, Telstra is considered the frontrunner.
Well, it won’t exactly be ‘Telstra’ owning the NBN, rather Telstra’s infrastructure division InfraCo. The report tells us that if Telstra did decide to bid, “the Australian Competition and Consumer Commission has been clear it would have to separate [InfraCo] from Telstra and become its own standalone company”.
So perhaps Telstra shareholders have a spin-off to look forward to at some point in the next few years. If the report is to be believed of course. Something for Telstra shareholders to keep in mind!
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Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.