Telstra dives on NBN hit to plans

TELSTRA’S bid to monetise up to $5.5 billion of future income from national broadband network payments has been shot down by the company rolling out the network.

Shares in the telco slumped to their lowest level in five years yesterday after it revealed NBN Co had refused to provide consent for the proposed financial transaction.

The move is a fresh blow to Telstra’s plans to minimise the impact of the NBN on its balance sheet, with the monetisation strategy designed to free up capital sooner rather than later.

Analysts labelled the development “highly negative” for Telstra.

“While the proposal is well progressed and supported by equity and debt investors, Telstra has been advised ... that technical consents from NBN Co will not be forthcoming,” Telstra said.

Its shares slumped 6 per cent — a fall compounded by the fact the stock when exdividend — to close at $3.61, their lowest level since June 2012.

More than 16 per cent has since been stripped from Telstra’s share price in an $8.6 billion rout.

Telstra yesterday quoted NBN Co as saying: “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.”

CLSA analyst Roger Samuel said Telstra management had previously indicated the approval process for the plan would be straightforward.

“This is highly negative for [Telstra] given the lack of funds available to be used for debt repayments and a share buyback,” Mr Samuel said.

Analysts at investment bank Citi said the rejection meant proposed share buybacks Telstra intended to fund with the NBN cash were unlikely to proceed.

Telstra announced the proposal to the market on August 17 as one of the outcomes of a capital allocation review that began last November.

The impact of the NBN on its business has also prompted the telco to flag cuts to the dividends it pays out to about a million investors.

Telstra chief Andy Penn said at the time the process would reduce debt by about $1 billion, with the balance to support a capital management program to enhance shareholder returns — most likely through a series of on and offmarket buybacks.

The recurring payment from NBN Co to access Telstra’s pits and ducts infrastructure is expected to grow to almost $1 billion a year by the time migration to the NBN is complete.