Telecommunications and network provider Telstra (ASX:TLS) and NBN have signed a MOU (Memorandum of Understanding), in order to negotiate a significant contract.
According to the agreement, Telstra will support the NBN network build-in areas that are covered by Telstra’s HFC (Hybrid fibre-coaxial) footprint, along with additional work for Telstra under NBN maintenance contracts.
The MOU will aim to finalise negotiations between Telstra and NBN to establish a contract covering the design, engineering, procurement and construction management of the NBN network in the HFC footprint, which is covered by the existing Telstra HFC network. This contract is expected to be completed in early 2016.
Telstra’s announcement also discusses an agreement to partake in some early works, in order to support the build of the NBN network in the HFC footprint, whilst the contract is being negotiated. This includes the prepping of Telstra NBN exchange locations, along with HFC planning and design work.
In addition, Telstra has been given 2 new contracts, being one of the network operations and maintenance service providers to NBN, which is expected to start in early 2016. The 2 new contracts have an estimated first year revenue of around $80 million, subject to the quantity of work.
The first contract, which is over 3 years, is composed of fixing faults on the copper network, whilst undertaking a minimal amount of new connections for services that are yet to transfer to the NBN. However, revenue is expected to contract in correlation with the NBN network build.
In contrast, the second contract, which is over 4 years, is associated with fixing faults and connecting new services on the NBN, for the FTTN (Fibre to the node), FTTP (Fibre to the premises), FTTB (Fibre to the basement), along with HFC technologies in only select areas that have switched to the NBN. Revenue is expected grow in the coming years, in allegiance with the NBN network build, dependent on the quantity of work. Both contracts have the option of extension.
Telstra CEO Andrew Penn attributed the series of agreements on Telstra and NBN’s close relationship: “I am delighted that we have an opportunity to support the NBN by leveraging Telstra’s knowledge and experience in network design and construction management, as well as continued maintenance. We have said all along that we are committed to providing whatever commercial services NBN needs to meet its business objectives”.
TLS shares last closed 0.74% up on Friday the 18th of December, at $5.48. However, TLS shares have contracted over 8% year-to-date.
Author: Simon Herrmann
Dec 21, 2015
Simon is a financial analyst at independent research firm Wise-owl specialised in small-mid cap growth opportunities and ethical investment opportunities. Simon's aim is to disrupt the cliché approach to investment decision making as he believes that socially and environmentally responsible behaviour is a necessity to long-term wealth creation. Simon has a deep fundamental understanding of the global financial landscape and has compiled 300+ research reports, valuations and corporate appraisals. Simon is commonly featured in major media outlets and his research is published weekly in The Australian.