If I ran Telstra, its not the deal I'd want [including sources and calculations].
This swaps $8 billion in Capital Expenditure by 2021 for $1.7-$3.0 billion/year for 20-25 years, a $34-$75 billion commitment, which on the surface seems bizarre.
It's "pay now, or pay and pay and pay and pay", just like Hire Purchase, but you never get to own it.
What we don't know is:
- What rate per line Telstra is willing to accept and over what minimum period.
- The current regulated price of $16/mth for an Unconditioned Local Loop Service (ULLS) won't return as much as the current SSU agreement.
- Optimistic (30% margin) modelling suggests a minimum of 25 years.
- The number of lines that will be charged.
- Will all 8.9M lines "passed" and presumably connected to DSL nodes need to be leased, or
- just the lines actually in service, a much lower figure requiring considerably higher payments.
- The EBITDA margin Telstra wants to achieve for that last-mile:
- it's average 40-44% or
- the 18-25% it gets now for ULLS.
- What happens when a customer stumps up $3-$5,000 to convert their copper service to Fibre?
- Telstra will need to be paid out the minimum lease payment.
- Who bears that cost?
- Will the Regulator, the ACCC, agree to any of this?
- Will the Telstra shareholders agree to Turnbull's "slight" variation?