Australia’s $38 billion plan to deliver high-speed Internet to more than 90 percent of its households cleared one of its last major hurdles Thursday when the government signed $12.5 billion worth of network deals with Telstra and SingTel.
The National Broadband Network, the biggest Australian infrastructure project in decades, will use Telstra’s network in a bid to knit together a country the size of Western Europe with high-speed broadband, with wireless or satellite services covering any gaps.
The National Broadband Network, also known as NBN, which is owned by the state, will pay Telstra 11 billion Australian dollars, or $11.6 billion, to hand over much of its network.
Optus, which is owned by SingTel, will receive 800 million dollars to move customers from its fiber-optic network onto the national broadband network.
The deals are a victory for a deeply unpopular Labor government, which has made the network a major plank in its program, as the vast distances and rugged terrain in Australia keep Internet speeds slow and costs high.
Some approvals still remain before the two deals can be settled, including a vote by Telstra shareholders Oct. 18 and clearance from the competition regulator for the company’s plan to split.
The deals also face a challenge from the conservative opposition, which has argued against the National Broadband Network and promised to review the project if it comes to power.
“What we want to do is get the broadband delivered, but at a lower cost, and that would involve at least in part redesigning the network,” Malcolm Turnbull, a telecommunications spokesman for the opposition, told Australian radio.
“These contracts will make that more difficult, but I don’t believe they’ll make it impossible. But there’s no question of anything being destroyed, ripped up or terminated, or anything like that,” Mr. Turnbull said.
The network will require total capital expenditure of 35.9 billion dollars and will need 40.9 billion dollars in debt and equity. The government plans to put up 27.5 billion dollars in financing, while the project will have to borrow 13.4 billion dollars from the debt markets.
The Optus chief executive, Paul O’Sullivan, said that the company looked forward to using the National Broadband Network to turbo-charge competition.
“This deal supports the NBN to create a level playing field for all telcos. Australian consumers will be the winners,” Mr. O’Sullivan said in a statement.
As for Telstra, the deal removes an uncertainty that has weighed on its shares, but a short-term rally is unlikely because of challenges in executing the deal and then adapting to the new marketplace, said Angus Gluskie of White Funds Management, an Australian wholesale investment manager.
“People will view it as a positive that they’ve got across this final step,” Mr. Gluskie said. “But it’s still an incredibly challenging environment for a telecommunications company to be in.”
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