One of the key parties in the Terria consortium seeking to bid for the national broadband network grant has withdrawn from the process, delivering a severe blow to the federal government's A$4.7 billion tender.
Telecom New Zealand, the second-largest company in the Terria consortium after Optus, has chosen to quit the bidding syndicate just six weeks before final submissions are due on November 26.
Terria is the only other main bidder against Telstra for the A$4.7 billion tender. The viability of the group, which warned on Tuesday it was facing funding issues, is key to the government's process as it provided pricing tension against Telstra.
The Australian arm of Telecom NZ, AAPT, is expected to announce its withdrawal today.
AAPT chief executive Paul Broad told The Australian Financial Review that the move was based on the company's decision not to invest its own money into the final project but that it should still allow Terria to proceed with its tender.
"It's the right time because we are at the point where people have to put money into the bid process, and we're not going to be doing that," Broad said.
He said the ownership of the network "was of secondary importance" to AAPT and that the group's resignation from Terria should allow him to "speak more independently about the regulatory process".
The move by AAPT comes just a day after Terria chairman Michael Simmons revealed the consortium was considering an alternative funding model because the global financial crisis had made debt harder to access.
Both Telstra and Terria have also warned that the rapid fall in the Australian currency in the past two months could impact their funding plans for the project, which could total A$15 billion.
But Communications Minister Stephen Conroy played down the funding concerns of the bidders yesterday, saying they were simply part of the "robust debate" ahead of the bidding deadline.
"It's too early to suggest that people will not bid on the basis of what's happened over the last few weeks," he said.
Senator Conroy also said the government would continue to consider a structural separation for the winner of the tender, a suggestion that has enraged Telstra.
Senator Conroy's comments followed the release of the report from the Regional Telecommunications Independent Review Committee, which again called for debate over structural separation.
"It should be debated openly and effectively, the Australian Competition and Consumer Commission and other regulators are given powers that are necessary to act," committee chairman Bill Glasson said.
"Let's decide whether operational separation is the way to go, whether it's functional separation or whether it's structural separation, but that's a debate that needs to be had," he said.
Senator Conroy said he would not reveal the government's position on structural separation until after the bids had been submitted.
But Telstra has said it did not plan to bid if structural separation was part of the conditions.
"The recommendations that the report makes will only increase the divide between regional and city telecommunications - something that Telstra has actively worked against for the past decade," Telstra Country Wide group managing director Geoff Booth said.
The government is reviewing the report and is yet to make decisions on the recommendations.
— Australian Financial Review