Wednesday, April 8, 2009

Telstra the Biggest Loser in NBN?

Despite the bad news for Telstra yesterday its share price jumped 4%. Premature move by investors? Or mature long term outlook decision? Is Telstra really the biggest loser in the Rudd Governments announcement yesterday to build their own National Broadband Network?

The reaction to the announcement and subsequent change in share price was based on the premature notion that none of Telstra’s competitors were going to individually or jointly own the new network, and further the announcement also reopened the door for Telstra to invest and participate anyway, despite being initially booted out of the running. But does it end there?

The first kick to the groin was the exciting development upgrade of fibre to the premise (over the original plan of fibre to the node), which now allows the new NBN to totally bypass Telstra's existing copper network – concurrently rendering it redundant. My guess is that this move would have left many folk over in TV land quaking in their boots as well. They now have 8 years (max) to reposition themselves before D-Day of instant movie streaming becomes available to 90% of the Australian population. Telstra gets a double hit here actually as it owns half of Foxtel *ouch*.

To add insult to NBN injury, the other slap in the face Telstra probably wasn't expecting yesterday was the governments indication that they are taking serious steps towards separating Telstra's retail and wholesale arms and the divestiture of its HFC network, in a move to try and curb its monopoly. Whilst the ACCC and angry consumers everywhere jumped for joy there would one group who would not have been so happy.

 Poor Telstra share holders have had a pretty rough deal in the past few years. The Howard government privatised Telstra, pocketing the profits of the T3 shares, which promptly plummeted just as quickly as phone bills rose. Now the new government is punishing them further.

 So far, so bad. The flip side? As IDC's David Cannon pointed out in this ZDNet story "Telstra is arguably the most advanced player in the country in terms of over-the-top services, and will see the NBN as the reason to keep driving its services play... It will use its large cash reserves to secure exclusive content and to enhance its hosted unified communications offerings for both business and consumer markets." 

 And Cannon is right. In the rapidly maturing age of virtualisation and Unified Computing technologies; the market transition which aids the movement of data towards cloud computing environments, will be big business for players who take advantage of the service models they create. The new system would open the doors for Telstra to become a services model for all sorts of applications in all sorts of industries, possibly expanding its reach around the nation... Telstra may yet have the upper hand. 

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