Telstra chairman Donald McGauchie said the company looked forward “to having constructive discussions with the Government at the earliest opportunity” when it was announced Telstra had been readmitted to the process it was spectacularly dumped from last year.

But if Telstra is serious about being readmitted into the Government’s NBN plans, it will need a conciliatory voice to smooth the tumultuous waters that have stirred between the two entities while they battled over regulatory and broadband issues.

Analysts are tipping that the safest bet would be to appoint an experienced internal candidate to lead the way back to theGovernment’s negotiation tables.

“Going offshore for a candidate was always going to be difficult given the uncertainty of the NBN and the weak Aussie dollar, but now that Telstra is back in discussions with the Government they need an internal voice of reason to help smooth the waters,” one analyst said.

Last week The Australian reported that headhunting firm Egon Zehnder and Telstra’s board were surging ahead in their search for outgoing chief executive Sol Trujillo’s replacement, and have whittled down the shortlist of contenders to fewer than 10.

Telstra has confirmed that a string of internal contenders are already out of the running, including Mr McGauchie and newly appointed marketing chief Kate McKenzie.

External overseas candidates such as Briton Gavin Patterson, chief executive of BT’s $18.5 billion retail divisions, have also been ruled out.

Whether or not Telstra’s readmittance into the NBN will pave the way for an internal candidate to take the reins from departing chief executive Sol Trujillo, analysts agree that the battle for the top spot will be fought between two candidates; Telstra chief financial officer John Stanhope and Telstra Enterprise and Government boss David Thodey.

So far, Mr Stanhope is the only executive to publicly put his hand up for the role, saying if he were to get the top job his first task would be to mend relationships with the telco’s various government and business customers.

Body: Mr Stanhope’s appointment is, however, a long way from being a foregone conclusion.

Telstra insiders say his tough staff management style has undermined a lot of internal support. Mr Thodey has widespread support from staff.

Among analysts it seems Mr Stanhope has firmed as the favourite.

“Stanhope already has good relations with government sectors, so now more than ever it’s looking like Telstra will go with an internal chief executive,” one analyst said. “Stanhope will be the new chief executive by default.”

Much is at stake for the telco and the new chief executive. Not only is there the possibility of playing a big part in Australia’s largest ever infrastructure project, there’s also the chance that Telstra’s network, retail and wholesale arms could be functionally separated by regulatory reform.

“Appointing an external firebrand chief would be the worst thing that Telstra could do right now,” one analyst said.

“They need someone to deliver the 2010 financial year targets that they have promised to the market, and it’s very difficult to get someone else to come in and take accountability for that.”

Mitchell Bingemann

David and Lynda Hanlon and daughters Louise and Chelsea, at home in Hobart, have had a free trial of the new system for two years.

For the past two years, David and Lynda Hanlon and their daughters Louise and Chelsea have enjoyed a fibre-to-the-home internet connection under a free trial, and they say the rest of the country should be excited at what’s coming.

More than 1500 Tasmanian businesses and homes in the state government-funded FTTH trial are hoping to be among the first Australians to be connected under the Rudd Government’s national broadband network.

“We used to get pretty frustrated with BigPond broadband — you’d click on a screen or program and then have to wait for the computer think time before it came up,” Mr Hanlon said.

The small box, or gateway device, in their house now delivers wireless internet for their two desktop computers and two laptops, cheap internet phone calls and digital TV channels.

A property valuer who normally works in an office in Hobart, Mr Hanlon has found working from home more productive thanks to the superior internet connection.

“I download quite a lot of research material, and the connection is just so reliable and a hell of a lot faster than sitting in my office in the CBD,” he said.

Tasmanian Premier David Bartlett yesterday promised towns with as few as 50 people would receive the new super-fast broadband, despite national guidelines limiting access to areas with more than 1000 inhabitants.

Mr Bartlett said the choice of Tasmania as the first state for the network rollout was as significant to the island as the hydro-industrialisation of last century.

The rollout in Tasmania, starting in July, would create thousands of jobs and help transform the economy, luring top IT companies and providing an initial edge over the rest of Australia and much of Asia.

The Premier said Tasmania would not be bound by the stipulation that only towns with 1000 or more residents would get the fastest connections. ‘I am very confident we will be able to go to towns as small as 50 premises.”

The Prime Minister was dismissive of his critics when he flew into Devonport yesterday to announce the Tasmanian rollout.

Mr Rudd accused the Coalition of engaging in “opportunistic, negative politics … that produces lists of communities that would miss out”.

However, he made no commitment to inhabitants of towns with less than 1000 residents in any state that they would have access to the fastest connection.

THE upward surge that Telstra shares experienced on the back of the Government’s $43 billion NBN announcement petered out yesterday as investors came to grips with the realities of the decision.

Telstra shares held steady at $3.35 in a falling market, after rallying 4.3 per cent, or 14c, on Tuesday.

Financial analysts attributed the initial share price surge to two main factors: market doubt that the Government’s $43 billion network would ever be built, and the belief that Telstra stands to benefit from being invited back into the NBN process.

Former Telstra chairman Bob Mansfield welcomed the Government’s decision to allow Telstra back to the negotiating table.

“It’s a courageous decision by the Government,” Mr Mansfield told The Australian. “I applaud the vision. Everyone is talking about how the Government should be spending more on infrastructure. I think it’s taken everyone by surprise.”

But Mr Mansfield also warned that if the Government’s scheme was implemented, it would certainly affect Telstra’s market value, “maybe not in three years, but certainly on a longer time horizon”. Yesterday, the first doubts about Telstra’s long-term market value crept into investors’ minds. Most major investment banking and financial services firms maintained hold recommendations on Telstra shares, but some did respond to this week’s news with upgrades to buy.

Goldman Sachs JBWere and Citi analysts upgraded their recommendations on Telstra shares to buy and hold, respectively, while JPMorgan and Nomura maintained hold recommendations. Macquarie Research Equities retained its Underperform recommendation for the telco.

The firms also narrowed their 52-week share price targets, which now range between $3.21 and $4.20.

“We see this as the Government’s way of encouraging Telstra to co-operate, as opposed to a significant reform plan. Telstra’s reasonably conciliatory announcement suggests this will be the company’s mindset,” Goldman analyst Christian Guerra said.

“We say this because, in our view, the outcome that drives the most significant value destruction for Telstra is non-participation in the NBN.” But while the readmittance of Telstra into the NBN process helped to buoy its share price, other analysts attributed the rally to a long overdue response from a market that has been climbing steadily over the past couple of weeks.

“Compared to the rest of the market, Telstra has underperformed by at least 25 per cent on the last month. So it’s a bit of a relief rally. Even if it had been a bad NBN outcome for Telstra and Optus was appointed, this might have happened,” one analyst said.

Some analysts also said that the prospect of the NBN never being built had also helped boost the telco’s share price.

Mr Guerra said the NBN could fail due to a lack of investment from the private sector and because consumers were increasingly shifting to wireless technology. “There’s a real possibility of the NBN failing to eventuate. “The key issue is demand, which, in our view, will be compromised by the shift to wireless and poor demand for the new NBN from fixed-line players,” he said.

THE first sign of the Government’s $43 billion national broadband network appearing in your street is likely to be another wire placed in the tangle of cables carried by suburban telegraph poles.
The federal Government will use poles and underground pipes near homes to roll out the fibre backbone that will underpin the new national broadband network.

As part of the Government’s plans to build the network over the next eight years, fibre-optic cable will connect 90 per cent of the country to the internet at speeds of 100 megabits per second.

The Communications Minister, Stephen Conroy, also announced two satellites would be launched to supply wireless technology to the 10per cent of the population who live in towns of fewer than 1000 people.

The Government’s fibre-to-the-home broadband network could be implemented by running a fibre-optic cable from a telephone exchange directly to each house. This would bring the fastest speeds and be the most expensive solution.

A second option would be to run fibre-optic cable from an exchange to a passive hub, where it is split and redirected to each home. Although this method is cheaper, bandwidth and speeds would be lower because capacity is shared.

Existing Foxtel or Optus fibre-optic cables that run down many streets could be used to deliver the broadband, if the existing copper wires, which branch from the cable into homes, were replaced with fibre optic branches. However, splicing multiple branches from a single fibre-optic cable to homes would reduce bandwidth and speeds.

A discussion paper released by the Government on Tuesday offers little detail on how it intends to wire up the country with fibre optics to the home.

The paper says telcos will be given access to the poles, ducts and pipes of other utilities to install infrastructure. Importantly, the Government will allow fibre to be rolled out overhead on existing poles.

In many streets in capital cities this is likely to mean a third wire hanging alongside the two existing cables used by Foxtel and Optus.

Telco access to information about the location and availability of poles, ducts and pipes will also be improved.

But there is no detail as to exactly where the cable will be laid underground and what areas will need to be dug up in order to achieve this. Additionally, there are no descriptions of how the cable will hang from poles.

The Government also plans to make it mandatory for NBN infrastructure to be installed in greenfield estates instead of the current practice of using copper.

Senator Conroy was tight-lipped about exactly how the NBN would be rolled out and a spokesperson said these plans would be formulated over the next nine months.

There are signs the main approach will be using overhead cables, based on the plans for the $500 million Tasmanian rollout, the Government’s first cab off the NBN rank.

According to the Tasmanian Government, the rollout — which is also being performed by state-owned electricity company Aurora — will deliver 70 per cent of the fibre via overhead means while the remaining 30 per cent will be delivered underground.