“We are confident that we will have very significant progress to announce by Christmas,” Conroy told reporters in Sydney today. “We are engaged in very constructive dialogue.”

Melbourne-based Telstra may be blocked from buying new airwaves to expand mobile services unless it separates its national copper-wire network. Phil Campbell, a telecommunications analyst at Citigroup Inc., said theres a 50 percent chance the two sides will reach a non-binding agreement to sell assets to the governments proposed A$43 billion ($39 billion) fiber network NBN Co. before Christmas.

“A compromise is more than likely,” Campbell said in a note to clients today. “Telstras involvement is important in lowering the NBN build cost,” wrote Campbell, who has a “hold” rating on the stock.

Telstras options include selling the network, keeping the assets or transferring them to NBN in return for an equity stake or cash.

Any agreement will take “a couple of years” to implement, Conroy said, without providing further details.

Telstra has Australias only national network and the company accounts about 75 percent of the countrys fixed-line voice and Internet data revenue. Rivals such as Singapore Telecommunications Ltd.s Optus Pty must pay fees to tap into Telstras network to offer services.

“We will deliver the wholesale open access network that we have promised, and we will legislate,” Conroy said.

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