December 20, 2010 / 2:19 AM / 9 years ago

UPDATE 1-Australia's broadband network needs over $40 bln

* Govt to seek A$13.4 bln from markets 2015-21

* Broadband network to have 7.04 pct rate of return

* Govt sees Telstra deal early in 2011 (Updates with background, detail)

By Rob Taylor

CANBERRA, Dec 20 (Reuters) - Australia will need A$40.9 billion ($40.4 billion) in equity and debt to fund its National Broadband Network and the government will put up A$27.5 billion of that while the NBN will borrow A$13.4 billion from markets, the government said on Monday.

The network — a key election promise for the ruling Labor’s minority Labor government — promises to deliver an internal rate of return of 7.04 percent and reaching around 13 million homes or 70 percent of households, the government added.

“This is the telecommunications development of our century,” Prime Minister Julia Gillard said. She added the NBN could boost economic growth by an estimated 1.3 percent but she did not provide a time frame for the estimate.

The government added that A$11 billion deal with the country’s largest telcoms firm Telstra over the use of its fixed-line network as the basis of the network — a key element of the network — would be finalised by January.

The deal is slightly later than Telstra end-2010 deadline but would still come in time for Telstra shareholders to approved the deal by mid-2011, NBN Co. Chief Executive Mike Quigley told reporters.

Australia’s slow and expensive Internet service has often frustrated voters, making the network a key policy issue, and the government stepped in to back the network as the country’s vast distances and rugged terrain kept private providers away.

Gillard said the new wholesale network, which has run into opposition from conservative rivals, would be financially viable to build and Quigley said the NBN Co is expected to be a top-tier Australian debt issuer, with most funding to come from overseas investors.

Annual revenues for the government-backed wholesale network, which will deliver data speeds of up 1,000 Mbps, were forecast at A$5.8 billion in fiscal 2021, building to A$7.6 billion in 2025, with total capital expenditure of A$35.9 billion.

The government would raise an average of A$1.9 billion a year over the six years from 2015 to 2021, Quigley said. (Reporting by Rob Taylor and James Grubel; editing by Balazs Koranyi)

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