Internet
Prime Minister Kevin Rudd said the nations largest infrastructure project will help support 200,000 jobs and bolster the faltering economy. The government will own a majority stake in a company that will spend an initial A$4.7 billion ($3.3 billion) and as much as A$43 billion over eight years. The network will provide Internet access 100 times faster than that currently available.
“Its time for us to bite the bullet,” Rudd said in Canberra today, adding that construction may begin in June. “Absent taxpayer investment in the corporation, this technology could not be laid out.”
The governments rejection of wholly private proposals opens the door for Telstra Corp., which it dropped from contention in December for failing to provide a plan for small businesses. The remaining bidders were the Terria group led by Singapore Telecommunications Ltd., Canadian-based Axia NetMedia Corp. and Acacia Australia, a consortium led by former Telstra executive Doug Campbell and Australian businessman Solomon Lew.
Telstra, Australias biggest phone and Internet company, rose as much as 5 percent in Sydney trading after Communications Minister Stephen Conroy said the company will be offered a chance to invest in the network. The stock fell a record 12 percent the day it was disqualified from bidding.
“The market sees that Telstra is back in the game,” said Ben Potter, Melbourne-based research analyst at IG Markets. “This offers the opportunity of potentially partnering with the government. Had one of the other bidders been awarded the contract, Telstra would have been out of the race.”
Economic Stimulus
The governments planned investment is in addition to about A$88 billion in stimulus spending announced in the past six months to protect Australia from a recession. The economy will probably shrink this year for the first time since 1991, according to the central bank.
“We have tested the market, through the exercise we have been through, shaped by the current state of the global economy, and that has not produced an outcome we believed makes the best use of the taxpayer dollar,” Rudd said.
The government last year called for tenders, saying it would invest A$4.7 billion to help build the network. Todays total investment is almost ten times that amount, with the government prepared to hold at least 51 percent of the new company and get the rest from private investors and so-called Australian Infrastructure Bonds.
Catch Up
The investments may help Australias level of broadband Internet usage approach levels in other developed markets. About 17 percent of the population had high-speed Internet connections, short of the 19 percent in the U.S. and Japan, and 26 percent in South Korea and Switzerland, according to JPMorgan Chase & Co.s Internet Investment Guide last year.