Australia Cancels Broadband Deal
SingTel-Led Network Is Said Not to Reach Enough Remote Areas
By Lyndal McFarland
The Wall Street Journal
Friday, April 4, 2008

SYDNEY, Australia -- The Australian government canceled a 958 million Australian dollar (US $869 million) funding agreement with a venture led by Singapore Telecommunications Ltd. to build a broadband network in Australia's more remote areas, saying the proposed network didn't meet coverage requirements.

Stephen Conroy, the minister for Broadband, Communications and the Digital Economy, said the proposed network by OPEL Networks Pty. Ltd. -- a joint venture of SingTel's Australian unit, Optus, and a unit of Futuris Corp. of Australia -- didn't satisfy contract conditions.

Analysts said the decision will likely make an upcoming tender for the government's planned nationwide high-speed broadband network even more competitive.

The Labor government, elected in November, is promising to provide 98% of Australian homes with high-speed Internet services in the next five years. It has pledged as much as A$4.7 billion in government funds to build a so-called open-access, fiber-to-the-node broadband network in a public-private partnership.

The government is hoping to attract proposals for the network from a number of companies, including Telstra Corp. and the G9 consortium of nine telecommunications companies, led by Optus.

Labor had promised to honor the decision by the previous Liberal-National coalition government to award funding to OPEL, but it was always a contentious contract. Rival Telstra had argued that the OPEL network would largely duplicate its existing services with little benefit to rural Australians.

Mr. Conroy said Wednesday that the planned network failed to meet requirements that the network provide coverage to 90% of identified "underserved" regional areas. He said his department determined that the network would have covered only 72% of the identified underserved premises.

The OPEL partners said they believe the network proposal satisfied conditions. Optus Chief Executive Paul O'Sullivan called on the government to have an independent group review the department's findings. Mr. Conroy said there wouldn't be an external review.

Mr. O'Sullivan said Optus is "considering all its options," now that the funding has been scrapped.

Mr. Conroy declined to comment on the prospect of legal action from OPEL. He said the maximum compensation payable under the contract is A$2.5 million.

Telstra welcomed the decision and said it will drop legal action against the government for awarding the project to its rival. Analysts said the news would help Telstra a bit and will mean the company won't face high-speed broadband competition in regional areas for some time.

--Andrew Harrison and Rachel Pannett contributed to this article.

Write to Lyndal McFarland at lyndal.mcfarland@dowjones.com

http://online.wsj.com/article/SB120716084231383941.html?mod=telecommunications_primary_hs