government bins broadband contract

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    Good for Telstra

    April 02, 2008
    THE Federal Government has cancelled the contract for Optus and Elders to build a wimax broadband network.

    Futuris Corporation, which owns Elders, and Singapore Telecommunications, Optus's parent, both told the Australian stock exchange of the cancellation of the contract this morning.

    Futuris and Optus, in an equal partnership called OPEL, were awarded $958 million by the Howard government to construct a broadband network for rural and regional Australia.

    According to the companies' statements to the stock exchange this morning, the new government, which came to power in November, said it cancelled the contract because of an assessment that the implementation plan did not meet prescribed coverage requirements.

    The Government also was concerned that networks would be duplicated as it has proposed its own fibre-to-the-node broadband plan, according to the statements.

    Futuris and Optus maintain the OPEL plan satisfied the prescribed coverage requirements.

    If the companies are unable to recover money from the Gvernment, Futuris will make a provision of $15 million as a non-recurring item and Optus will write off $9 million.

    The cancelled plan would have delivered improved broadband services to 889,322 underserved premises in rural and regional Australia within two years at metro-comparable prices, Futuris and SingTel said.

    The commercial arrangements through OPEL were not expected to have a material impact on the financial statements of SingTel for the year ended March 31, the company said.

    Futuris said the Government's action does not impact Elders' retail operations or Amcon Telecommunications or its investments.
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