Telstra sells Velocity, South Brisbane fibre networks for $140m

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Telstra sells Velocity, South Brisbane fibre networks for $140m

Uniti emerges as purchaser, promises gigabit upgrade.

Telstra has finally found a buyer for its residential fibre networks with Uniti Group set to pay $140 million for the Velocity estate and South Brisbane assets.

Uniti Group said in a financial filing that it would pay $85 million upfront, with the remainder payable in installments or once all the assets had been migrated across.

The final price would depend on "the size of the customer base at the time of migration".

Uniti said it will part-fund the purchase by extending existing debt arrangements and through the issue of new shares.

There are other financial aspects to the deal: Telstra will pay Uniti a $21.6 million license fee to continue supplying services over the networks until they can be fully moved under Uniti, while Uniti will pay Telstra an additional $7 million a year for at least a decade for duct and exchange access.

Telstra is under a long-term obligation to either upgrade or exit its residential fibre business, though action has been put off several times.

The most recent extension from the government gave Telstra until July 1 2022 to act, with authorities saying they would refuse to extend beyond that.

In good news for Velocity customers, Uniti has committed to upgrade their broadband infrastructure as part of the migration.

“Uniti intends to undertake a network ‘refresh’ concurrently with the migration of customers, to increase maximum broadband speeds available to Velocity estate premises, including through the intended deployment of the Uniti XGS-PON technology to a large proportion of Velocity premises,” Uniti said.

XGS-PON is a symmetrical, gigabit-capable passive optical networking technology standard.

“The transition planning and network and IT integration activities are expected to start from March 2021, given the preparatory work the parties need to undertake,” Uniti said.

“Following the IT and network integration between Uniti and Telstra, the customer transition nationally is anticipated to commence in July 2022 and take approximately 12-15 months to complete.”

The networks presently have a combined 50,000 active customers and pass about 68,000 premises. 

Under Uniti ownership, customers will have vastly more retail options, with Uniti saying "more than 40 retail service providers" (RSPs) could gain wholesale access to Velocity once the migration is complete. Telstra, for the first time, will become an RSP on the Uniti network.

Velocity mostly refers to infrastructure built in what were once new housing estates.

Uniti noted that Velocity estates did not have NBN access, therefore it anticipates long-term revenue streams once the assets are under its control.

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