Telstra axes $4.4bn fundraising plans after nbn rejection

By:
James Pearce
Published on:

Telstra will ditch its securitisation plan after the National Broadband Network refused to back its proposals

Telstra has ditched a plan to raise up to A$5.5 billion ($4.4 billion) through a revenue securities deal after the National Broadband Network (nbn) refused to back its move.

The Australian operator was looking to strike a deal with investors which would see it get upfront a chunk of the A$1 billion it receives from nbn on a yearly basis for rental of Telstra’s infrastructure.

Telstra had planned to use the money to pay down some of its existing debts, as well as fund a share buyback scheme, according to reports in Australia. 

"Essentially we can't see how nbn's position can be protected/improved by Telstra's securitisation plan especially given the unpredictability of our operating environment in the 2020s" NBN said in Telstra's statement to the Australian Stock Exchange.

Telstra spokesperson Jon Court told Reuters that without nbn’s consent “we can’t proceed”.

In a subsequent statement, nbn said it "gave serious consideration to Telstra's proposal but does not believe it is in the best interests of nbn." The network builder said "the monetisation may create long-term impediments to [its] future decision-making capability".

It added: "nbn is not prepared to accept the reduced flexibility in unforeseen revisions to our existing agreements.  The risk is difficult to quantify but our primary responsibility is to protect the interest of our investors, the Australian taxpayers."

The government-backed nbn is seen as a major threat to Telstra’s wholesale operations in Australia, having struck a complex deal with the firm back in in 2011 which sees its infrastructure and relinquish its wholesale customers.

The deal, which was originally valued at A$11 billion, but was subsequently renegotiated in 2014 after a change in government and ensuing change to NBN policy.

It comes at a time when Telstra is under increasing pressure, having just announced plans to cut its dividend by 30% in financial year 2018, partly because of the impact of nbn.