In February, Telstra came under fire after writing off almost AU$1 billion from Reach, effectively valuing it at zero. Now, the two telco giants have worked out a deal with Reach's banking syndicate for new terms on its US$1.5 billion loan facility.
Both parties will direct 90 percent of their international capacity requirements from reach, and have each paid US$143 million as prepayment for future capacity use.
"For the other operators which were hoping Telstra and PCCW would let [Reach] go down so they could mop up demand, this is a blow to them," Andrew Chetham, Gartner principal analyst, told ZDNet Australia .
"If Reach had gone down and [Telstra and PCCW had] chosen not to support it then they wouldn't have had to direct [90 percent of] traffic to it, and that traffic would be on the market for the best price," said Chetham. "It's a fairly substantial amount of traffic."
"The banks were clearly not going to let Reach renegotiate the loan without [Telstra and PCCW] putting something in," said Chetham.
The two telcos have been buying capacity from Reach to date but part of the new agreement is that the prices are benchmarked against market forces to avoid the telcos overpaying.
