Telstra: don't subsidise new Optus network - News - Communications

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This story was printed from ZDNet Australia.
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Telstra: don't subsidise new Optus network

By AAP
April 06, 2005
URL: http://www.zdnet.com.au/news/communications/soa/Telstra-don-t-subsidise-new-Optus-network/0,130061791,139187299,00.htm

Telstra today said its rival Optus should not receive a regulatory break if it wants to extend its broadband network.

Optus wants to install switches in 150 to 200 telephone exchanges so it can reduce the fees it has to pay to Telstra when Optus customers are connected through.

However, Optus has not yet confirmed whether or not the AU$80 million plan will go ahead, as it instead waits for the outcome of talks with the Australian Competition and Consumer Commission (ACCC), governments and Telstra.

Optus wants the ACCC in particular to consider reducing the cost of local call resale for telcos that install their own switches at exchanges.

But Telstra today said Optus - and its parent company Singapore Telecommunications - should not receive discounts for extending its infrastructure.

"SingTel wants a discount on investing in telecommunications in Australia - yet other competitors are already making returns by doing exactly what Optus wants a subsidy for," Telstra regulatory spokesman Rod Bruem said.

"Telstra agrees this is about Australia's competitiveness - at the end of the day, the costs of maintaining Australia's network must be paid for."

Telco analyst Christian Guerra from Goldman Sachs JBWere today said that if Optus' plan went ahead, it would be a significant threat to Telstra.

"This is in essence the first time Telstra has faced legitimate risk from a rival last mile access network," Guerra said in a report to clients.

"For a very small investment, Optus will have a voice and data network rivalling Telstra's." Optus believes it could eventually achieve an AU$15 a month margin benefit for voice customers through its new switches and up to AU$45 a month for customers who also bundle with broadband.

However analysts at UBS don't think Optus needs to rush into the rollout. "Optus is currently expected to continue growing its revenues and hence we believe that there is no need to rush into the ... investment, which we see as a way to improve margins in the medium to long term," UBS said in a report.

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