Goldman Sachs wins key role in $43bn broadband project
James Chessell | The Australian | December 01, 2009
THE commonwealth-owned company charged with building the national broadband network has hired a leading investment bank to help negotiate the financial and strategic challenges associated with the $43 billion project.
It is believed that NBN Co -- the company established by the Rudd government in April to design, procure and build the fibre-to-the-home network -- has engaged Goldman Sachs JBWere to advise it on various financial aspects of the project.
The decision to hire GSJBW was made by NBN Co executive chairman Mike Quigley and chief financial adviser Jean-Pascal Beaufret following a beauty parade of investment banks in recent weeks. It is believed that Credit Suisse provided GSJBW with the greatest competition.
Market sources said the appointment was not expected to be full-time during the early stages of NBN development and was unlikely to provide GSJBW with a lucrative stream of fees.
However, it is a high-profile role that puts GSJBW in the middle of one of the most ambitious, complicated and politically fraught infrastructure projects ever undertaken in Australia.
The NBN is providing work for an increasing number of management consultants, lawyers, investment banks and accountancy firms. Macquarie Group is advising Telstra, while McKinsey & Co and KPMG are advising the Department of Broadband, Communications and the Digital Economy on an NBN implementation study.
McKinsey and KPMG have been given the lucrative job of providing advice on "operating and governance arrangements" for NBN Co that includes ownership caps, private sector investment, network design and procurement opportunities for local business.
GSJBW and the other advisers face a tough job given the economics of the NBN are yet to be proved to a sceptical market. This will make financing the project difficult. One of GSJBW's first priorities is likely to be the possible acquisition of Telstra's dominant local copper network.
Communications Minister Stephen Conroy has threatened to break up Telstra -- and force it to sell its 50 per cent stake in pay-TV group Foxtel -- if it does not vend the copper network into the NBN or move its millions of fixed-line customers on to the new network.
Friction between the government and Telstra has dominated the NBN process, but both sides have struck a more measured tone in recent months. The delay of legislation that could have enabled the break-up of Telstra has also given both sides more time to negotiate.
Telstra's network is attractive because NBN Co could achieve cost savings by running its fibre through the ducts that currently hold the copper lines. It is believed that Singapore Telecommunications subsidiary Optus is also trying to sell its $1.5bn HFC cable network to the NBN in exchange for equity.
There is also debate about what NBN Co should charge for access to its network if it is built. The NBN will be wholesale-only, meaning it will sell access to telecommunications companies such as Telstra, Optus and iiNet.
A spokesman for NBN Co declined to comment. A GSJBW spokeswoman also declined to comment.