KEY POINTS:
SYDNEY - Telstra Corporation, which has been kicked out of the bidding process to construct a national broadband network, says its approach to the process was the correct one.
Telstra also insisted it was right to reject calls to change its company structure and maintained its belief that it should own cables related to the network if it had won the bid.
Telstra shares slumped nearly six per cent to a two-year low in early trading after Australia's biggest telecommunications company said it had been excluded from the government's bidding process for the construction of the network.
"To participate in a process that does not rule out separation" was not in the best interests of shareholders, Telstra chief executive Sol Trujillo told analysts during a teleconference this morning.
"The single most value destroying event that could occur is separation," he added,
Mr Trujillo also said it was a very complex and costly project, and that the company would only do it if it benefited shareholders.
"Five billion (dollars) from our shareholders plus the $4.7 billion from the government still does not cover 98 per cent of the population.
"To do things that would simply dilute returns ... is something that we have determined is not in the best interests of shareholders."
Mr Trujillo was responding to a question from Goldman Sachs JBWere analyst Christian Guerra, who asked whether Telstra's "high stakes game" had come unstuck.
Shares in Telstra slumped 24 cents, or 5.81 per cent to A$3.89, ($4.78) the lowest since December 2006, as the S&P/ASX200 benchmark index gained 3.28 per cent.
Mr Trujillo said Telstra may rejoin the process further down the track.
"This is a very long process," Mr Trujillo said.
"The RFP (requests for proposals) process leads only to the minister getting a recommendation.
"It is open to the government to reengage with Telstra if and when it wishes."
Even if Telstra doesn't get to build the fibre-to-the-node network, the Melbourne-based company has options for growth, Mr Trujillo said.
"This decision does not effect our business today," he said.
Mr Trujillo said Telstra can deliver faster broadband speeds in the future over its wireless network, its existing fixed line network, or by extending its cable network.
Mr Trujillo, who said he is yet to speak to Minister for Communications, Broadband and the Digital Economy Stephen Conroy, also said the Department of Communications had a history of failing to deliver new infrastructure.
"Three-and-a-half years and counting on NBN, including an RFP process running six months behind schedule and still counting."
Mr Trujillo insisted Telstra's proposal was the only realistic option, and the company would respond by building up its own alternative network if another bidder was chosen to build the broadband network by the government.
"Our proposal is still the only one that is funded, is the only one that has true technical capability ... to actually deliver and integrate into our existing network."
Despite Telstra's claims it remains in the race to build the network, the RFP clearly states that bidders must include a plan of how to involve SMEs in the project.
"It is a condition for participation in this process that proponents submit a plan outlining opportunities for Australian and New Zealand SMEs to provide goods and services to the project," it says.
Opposition Communications spokesman Nick Minchin said the government had made a shambles of the broadband tender process from the outset.
"This is just the latest instalment in an extraordinary saga of ineptitude, delay and confusion in the government's management of a $4.7 billion project," Senator Minchin said.
The remaining bidders include Optus Networks Investments, a Canadian outfit called Axia, a syndicate of Australian businessmen called Acacia, as well as the ACT's Transact and the Tasmanian government, both of which have lodged regional bids.
A government-appointed expert panel is expected to name a preferred bidder in February.
- AAP