Telstra is holding its investor day on Thursday and one of the matters that could come up for discussion is whether the $35bn telecommunications giant is positioning itself to buy the National Broadband Network.
Market sources say Telstra has been selling out of other businesses that could create competition hurdles for such a transaction to proceed.
Acquiring the NBN from the federal government would be an enormous bite for Telstra, with estimates suggesting its valuation could be between $60bn and $80bn.
But at the same time, an acquisition would be a game changer for the $35bn telco.
A deal would needed to be preceded by a demerger of Telstra InfraCo, which has been on the table in the past and consists of all of its telco-supporting infrastructure including fibre optic cables, mobile towers, data centres, masts and poles exchanges and subsea cables.
Telstra’s shares have been trading below $3 for the past few months, and an announcement about strategic moves could offer its share price some support.
There is access in the market to cheap debt amid low interest rates, and an acquisition of NBN could be carried out with superannuation funds, which are keen to gain exposure to telecommunications assets.
This was witnessed with the Queensland state-owned investment fund QIC making a bid for internet infrastructure company Superloop last year for $458m, before walking away. There was also competition recently between Aware Super and Uniti Group for OptiComm, a company that provides internet infrastructure for some new housing developments that choose to install its offering rather than NBN.
Uniti is expected to make additional acquisitions after it buys OptiComm, and some predict it could also vie for Telstra’s Velocity fibre business, another sale that could pave the way for competition clearance to buy the NBN.
The federal government has ruled out selling the NBN before the next election, and if it did reverse its stance on this, it would need to change legislation.
The hurdles that need to be achieved include a network declared fully completed and operational by the communications minister, a report by the Productivity Commission exploring economic and regulatory matters that would be reviewed by a parliamentary committee and conditions of sale declared by the finance minister.
Yet a sale would provide the government much needed funds following the economic impacts from COVID-19, and a sale would only need to be for at least the $51bn that the asset cost to build.
Analysts estimate NBN’s earnings before interest, tax, depreciation and amortisation for the NBN could reach about $4.5bn annually.
Globally, fibre businesses are selling for between 18 times and 24 times their EBITDA overseas.
Telstra used Macquarie Capital and JPMorgan in 2017 when it explored a possible securitisation and demerger of its long-term NBN contract.
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