Telstra accuses Optus of NBN non-compliance

After drawing criticism for submitting an incomplete NBN bid of its own, Telstra fires a few rounds at Optus claiming it is now failing to adhere to the NBN rules

Telstra (ASX: TLS) has accused Singtel Optus (ASX: SGT) of failing to make financial disclosures to the ASX regarding its source of funding for the National Broadband Network, just days after its own lack of compliance with the tender process.

“The disclosure rules are clear – if Singtel Optus has made an actual, material commitment of capital to the NBN, then it needs to be disclosed to the ASX,” Telstra said in a statement.

The accusation comes just days after Telstra caused a stir itself by not adhering to the tender rules when it submitted a 12 page bid – compared to Singtel Optus’ 1000 page proposal – that Communications minister Stephen Conroy indicated would be accepted and thrashed out by the expert panel tasked with evaluating all bids.

Telstra’s pseudo-bid attracted criticism from telco analysts for being incomplete, failing to meet coverage requirements, and touting outdated broadband prices for the new network.

“Yes it is a bid, albeit very light on detail and non-compliant with the stated goals of the original RFP document,” said Dr Paul Brooks, founder of telecommunications and next-gen network consultancy, Layer 10.

“Normally, a bidder for a tender attempts to put as much information forward up-front, and then the subsequent clarifications are largely incremental information. Telstra have taken the opposite path,” he said.

When lodging its proposal, Telstra said it clearly disclosed its intentions to the ASX, including its desire to commit $5 billion in capital to the project if the “required enablers” are put in place – namely a guarantee of the regulatory framework and protection from structural separation.

“If Telstra gets all the concessions they have asked for, then for other ISPs it would result in a continuation (at best), or a worsening of the stranglehold that Telstra has at the moment,” Brooks said.

Telstra said because Optus has not made any such ASX disclosures it has therefore not made any financial commitment of its own capital to the NBN project.

“With a bid cost of $15 billion and a maximum government contribution of $4.7 billion, this means there is a $10 billion funding hole in the Singtel Optus proposal,” Telstra said.

Telstra added that Singtel Optus is looking like a “sub-prime NBN bidder”.

IBRS analyst Guy Cranswick said he believed when it came to funding Optus would be in a more difficult position than Telstra.

“Their CFO was articulating some concerns about the financial strength of bidding and what the debt versus return equation will mean over the years ahead,” Cranswick said.

“The biggest thing to face at the moment is the deteriorating worldwide economic conditions and the cost of money…The real issue is the money put at risk to invest over a long period of time. The cost of money is still tight and if we can believe what the Prime Minister said in parliament this week Australia will probably take a bit more of a soaking.”

ARN understands that Optus has submitted a fully compliant NBN bid with all required financial information.

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