Chapter 6 Private Equity Funding and Telstra Workforce Issues
At the start of the Third Review, the committee adopted a working group structure,
to enable it to focus on several topical issues under its broad terms of
n The potential of
private equity to fund the National Broadband Network (NBN); and
n Telstra workforce
issues in the context of the rollout of the NBN.
These issues were identified for future inquiry in the First Report and
initially reported on in the Second Report.
The committee has investigated these two matters in some detail over the
third reporting period and its findings are discussed below. Given the ongoing
significance of these areas, the committee will also continue its inquiries
into these matters over the fourth reporting period.
Private Equity Funding
This section of the report considers issues associated with private
equity engagement in funding the NBN. Government funding of the NBN over the rollout
period, under the equity agreement between the Government and NBN Co, is
discussed in Chapter 2.
On 22 June 2011, the Government and NBN Co entered into a funding
agreement, whereby the Government provided assurances to NBN Co that it would
provide equity funding to NBN Co until 30 June 2021, unless the agreement was
terminated earlier. Total Government funding
pursuant to the agreement is capped at $27.5 billion.
As at 31 December 2011, the Government had made a total of $2.482 billion
available to NBN Co, of which $1.12 billion has been provided in the current
The committee continues to be interested in when and how private equity might
be engaged in funding the NBN wholesale platform,
and at what financial return to the Government and, ultimately, taxpayers.
The current timeline for the NBN project is set out at Figure 6.1.
Figure 6.1 National Broadband Network Long-term Timeline Commencing
in June 2010
Co Corporate Plan 2011–2013, p. 22.
First and Second Reports
The First Report signalled the committee’s intention to examine the
potential of private equity to fund the NBN. The committee was particularly interested
in the issue of when and how private equity might
be engaged in the wholesale platform.
The committee concluded that it would ‘seek further information on how private equity will be attracted, used and repaid to
the Government on its NBN investment’. In particular, the committee was interested in whether there are ‘options
available to NBN Co to engage private equity through the construction phase of
the NBN, to enable a return to taxpayers sooner’.
In the Second Report, the committee sought information on ‘whether it would
be in the national interest to bring forward the timeframe for private equity
engagement’. Drawing on the McKinsey
& Company/KPMG Implementation Study, the Department of
Broadband, Communications and the Digital Economy (DBCDE) advised that:
On balance, the Implementation Study recommended that the government
should fund NBN Co with equity investments until NBN Co can raise its own investment-grade
debt and pay interest from its own cash flow ...
...private equity should not be introduced before
privatisation as it will be too expensive and constrain Government’s ability to
get its policy and regulatory settings right before allowing private ownership.
The committee was also interested in the ‘cost/benefit to the economy of
bringing forward the introduction of private equity’.
The DBCDE advised that the Implementation Study had concluded that ‘private
equity will be more expensive than government equity’ in funding the NBN.
Noting this advice, it was concluded that ‘more work need[ed] to be done
in detail’ on the issue of private sector engagement and that investigation of
this matter would therefore be continued over the third reporting period.
Following the Second Review, the committee was interested in more
closely examining the following issues:
n the possibility of
bringing forward a timeframe for private equity engagement in funding the NBN,
within the existing legislative framework
n further testing the
cost/benefit of bringing forward a timeframe for private equity engagement in
funding the NBN
n NBN Co’s debt
Existing Legislative Framework
The committee was interested in whether, under the existing legislative
framework for the NBN, a timeframe for private equity engagement in funding the
NBN might be brought forward during the construction phase, thereby enabling an
earlier return to taxpayers.
In its submission, the DBCDE explained that:
The introduction of any non-Commonwealth direct interest in
the share capital of NBN Co would be inconsistent with the existing legislative
provisions and social policy objectives ... The Government does not intend to
sell the network or take on private equity other than in the circumstances
outlined in the relevant legislation.
In terms of the existing legislative provisions, NBN Co was established
as a company under the Corporations Act 2001 (Cth) in April 2009 and is governed by the provisions of that act.
Further, as a company with shares that are owned by the Australian Government,
NBN Co is subject to the provisions of the Commonwealth Authorities and
Companies Act 1997 (Cth). NBN
Co is also governed by specific legislation, the National Broadband Network
Companies Act 2011 (Cth). This
legislation ‘sets out the circumstances in which the Commonwealth can dispose
or transfer shares in NBN Co’, including the following preconditions:
n declaration by the Communications
Minister that the national broadband network should be treated as built and
n the conduct of a
Productivity Commission inquiry into the regulatory framework for the network, impacts
of a sale of the Commonwealth’s equity on the budget and the supply of
broadband services and the impact on competition in the telecommunications
n conduct of a
parliamentary Joint Committee consideration of the Productivity Commission
n declaration by the
Finance Minister that conditions are suitable for the conduct of a sale
n expiry of a fifteen
sitting day disallowance period without either House passing a resolution of
Following satisfaction of all these preconditions ‘a sale of NBN Co can
proceed’. There are also provisions
placing restrictions on the nature of capital in relation to NBN Co. These ‘preclude
a party other than the Commonwealth being able to exercise all the voting
rights, holding any of the paid up share capital of NBN Co or holding any of
the rights to any distribution of capital or profits’.
Policy Rationale and Cost/Benefit
As discussed above, a further reason put forward by the DBCDE to explain
the difficulties in bringing forward a timeframe for private equity engagement
in funding the NBN was that this would be ‘inconsistent with ... social policy
objectives’. As the department observed:
There is a non-financial reason at work here ... For any
private equity contribution to the project that was beyond the trivial level,
the investor would be looking to have some control or influence over the use of
the equity and its return, which inevitably would lead to the risk of policy
compromises. The government is doing this primarily for policy reasons so it
undermines the logic of using private equity.
The department further pointed to the ‘Executive summary’ of the Implementation
Study on this point:
Government should fund NBN Co solely with Government equity
until NBN Co can raise its own investment-grade debt and pay interest from its
own earnings. Private equity should not be introduced at least until the
network roll-out is complete. To do so any earlier would be too expensive, in
terms of the returns required by investors, and would constrain Government’s
ability to establish the right policy and regulatory settings.
The department also highlighted a series of issues related to this
point, affecting the cost/benefit of bringing forward a timeframe for private
equity engagement in the NBN. The department explained that in the Implementation
Study the Government had sought advice from McKinsey & Company/KPMG on
the opportunities to attract private investment to the NBN, with a number of
key factors affecting the use of private investment having been identified,
n the amount available
n the returns required
n the level of control
required by the investor.
As Mr Harris, the Secretary of DBCDE, confirmed:
...at this stage in the NBN, the premium for risk required
for an equity investor would naturally be very high. KPMG wrote that very
explicitly in the implementation study ... It is primarily driven by the fact
that this is a very large project that will last for a very long time. It will
take a significant amount of upfront losses before it starts to cover its
costs. As a consequence, the premium for equity will be high. At this stage,
the advice and implementation study from KPMG was pretty clear: do not try and
draw down equity markets. We have not seen a reason to vary from that.
In terms of the amount available for investment, the DBCDE
explained that, while Australian superannuation funds have substantial funds
available for investment, these are ‘subject to quite rigid asset allocation
regimes involving a heavy focus on diversification of exposure between types of
investment and within investment types, between individual investments’. The size
of individual investments is ‘strongly biased towards low risk where returns
are highly predictable’. Accordingly, for stable low-risk investments ‘amounts
in the hundreds of millions can be available’, but for higher risk investments ‘the
amounts are in the tens of millions or less depending on the state of
Against this background, the department concluded that:
Despite government sponsorship the NBN would be considered
high risk for commercial finance sources because of project implementation risk
and concerns about the telecommunications policy objectives driving the
In terms of the returns required on investment, the DBCDE
explained that required returns are ‘highly sensitive to the state of
development of the investment’, with early stage investments requiring ‘returns
in the range 15-25 per cent’. However, as an investment develops and planned
targets are achieved, ‘the risk premium will reduce’. For the NBN, this
...completion of the initial rollout, planned construction
costs being achieved, services being taken up at the projected rates, data
utilisation increasing consistent with historic trends and the regulatory
framework for operation being locked in following the Productivity Commission
review set out in the NBN legislation. When all those conditions have been
satisfied, the returns required reduce to the 8-10 per cent range.
The department again pointed to the Implementation Study on this
Private investors value certainty and demand high risk
premiums to compensate for perceived uncertainty in an investment business
case. In the case of the NBN, this is expected to translate into private sector
investors demanding returns in the early phases of NBN Co’s network roll-out in
the vicinity of 15 to 25 percent—well above expected project returns. To
accommodate such financing, Government would need to accept a lower return on
its equity, while implicitly bearing most of the risk given its commitment to
the success of the NBN.
Against this background, the department concluded that, ‘in the period
of the rollout private share investment would be the most expensive source of
finance, achievable only through reduced returns on the public investment or
major policy compromises’.
Finally, in terms of the level of control required by the investor,
the DBCDE explained that in making investments the private sector assumes risk ‘which
it would require mechanisms to mitigate’. Mechanisms here could include ‘varying
levels of control of management or in the absence of that, mechanisms that
limit the flexibility of those that do have control’.
The department concluded that, in the case of NBN Co, ‘which has been
established by government for the purpose of achieving important social and
economic policy objectives’, judgements taken in the course of the rollout ‘in
response to changes of circumstance or policy’ could therefore be ‘in conflict
with the less complex commercial instincts of investors’.
Private Equity Funding Timeframe
In its submission, the DBCDE concluded that:
Consistent with the legislative framework for the ownership
of NBN Co there are very limited options for bringing forward private
investment in NBN Co.
The committee notes the possibility of options, while ‘very limited’,
for bringing forward private equity investment in funding the NBN and therefore
remains interested in monitoring this issue. Further, the committee observes
that the existing legislative framework and ‘very limited options’ for bringing
forward private investment in NBN Co need not slow progress in gauging investor
interest in the NBN or in exploring the cost/benefit of different capital
structures for the NBN.
The committee also notes the DBCDE’s broader definition of private
‘equity’ as also encompassing private ‘borrowing’:
Typically equity is considered to be share capital in a
company, which is consistent with the Macquarie Dictionary definition ‘the
interest of a shareholder of common stock in a company’. A broader definition
is also provided by Macquarie ‘those funds of a company which are raised by
borrowing from proprietors and external sources’.
As the department further clarified on this point, while the ‘introduction
of any non-Commonwealth direct interest in the share capital of NBN Co would be
inconsistent with the existing legislative provisions and social policy
objectives ... borrowings [debt financing arrangements] on the other hand are
not precluded by the legislative framework’. This matter is further
Figure 6.2 provides an outline of NBN Co’s funding profile in terms of
debt and equity funding through to 2028.
Figure 6.2 NBN Co
Funding Profile (debt and equity) to FY2028 ($billion)
Co, Corporate Plan 2011-2013, p. 141
The Government’s Statement of Expectations
specifies that ‘NBN Co should seek to raise debt capital at the earliest
opportunity it is able without external support’.
The NBN Co Corporate Plan 2011-13 assumes that maximum debt financing will
start from 2015. As the DBCDE noted:
NBN Co’s Corporate Plan 2011-13 plans for the introduction of
debt financing mid way through the rollout, that is commencing in 2015. This
plan, which is supported by the independent analysis of Greenhill Caliburn and
KPMG, is based on this timing being the earliest that the revenue generated by
NBN Co would provide lenders with confidence that interest charges can be met
and the borrowings repaid at the expiration of the term.
With debt financing on the radar in 2015, the committee was interested
to explore NBN Co’s progress to date on debt financing arrangements. The
Secretary of the DBCDE responded that:
...in debt financing, there are conditions on the kinds of
bonds that are raised which will be of great interest and will therefore shift
the profile required from particular financiers. So they will be thinking that
through at the moment ... I guess those ultimately will be questions that the
committee will be interested in, but my own view is that it is a little too
early now to be able to even ask a market participant because that will be
their first question: ‘Well, what kind of bond raising are we talking about
The committee was also interested to hear from Mr Quigley, CEO of
NBN Co, that:
In the company, we have not had any discussions on debt
The committee notes that NBN Co’s Corporate Plan 2011-2013 refers
to an ‘estimate of $13.4 billion of debt funding’, over the period to June 2021.
The plan also states that, from 2023 onwards, this would provide ‘a mechanism
for repayments of equity over time’.
The Corporate Plan 2011-2013 also assumes that ‘debt funding equivalent
to 33% of total funding required over the period FY2011-FY2021 would be raised’,
noting that, ‘if actual debt raised at the time was lower than projected, then
Equity Funding by Government would need to be increased’.
In terms of the ‘Achievability of debt funding’, the Corporate Plan
2011-2013 further states:
Critical to NBN Co’s ability to raise external funding
without explicit support by Government will be the opinions of debt providers
on the Company’s achievements, roll-out timeliness and connections uptake,
which will form the key metrics of credit quality ...
Market capacity, and the risk appetite of debt investors,
might limit the amount of debt that the Company can actually raise. This would
require revising the funding plan at the time to assume a higher level of
There is no assurance that this level of debt could be
issued. The level and timing of debt will be the major financial risk that NBN
Co will continuously assess.
This raises a number of issues—in particular, it would appear to be critical
for NBN Co to start considering its debt financing arrangements as soon as
n the fast-approaching timeframe of 2015 for the
commencement of debt financing
n that debt financing is projected to constitute 33
per cent of total NBN Co funding required over the period FY2011-FY2021
n that if actual debt raised at the time is lower
than projected, then equity funding by Government might need to be increased
n that the ‘level and
timing of debt’ has been identified as a ‘major financial risk that NBN Co will
need to continuously assess’.
At the time of drafting this report, NBN Co’s new corporate plan had
not yet been publicly released. However, as noted in Chapter 2, on
16 April 2012, the NBN Co informed the committee that it would be
revising the NBN rollout targets contained in its Corporate Plan 2011-2013.
Targets would be revised and published through the release of a new corporate
plan to the Government by the end of May 2012.
The committee will therefore be interested if there are any revisions in
the new corporate plan relating to debt financing. Any revisions to NBN Co’s
rollout targets in the new corporate plan will need to be closely monitored as
any delays in this regard may in turn push back the projected timeframe for debt
financing arrangements, with possible implications for Government equity
The committee will be interested to investigate NBN Co’s progress
in this area over the next reporting period, once the new corporate plan has
The committee remains interested in examining the points of entry for
private investment in the NBN—both in the form of equity and debt funding—to
ensure a maximum return on the Government’s investment is secured on behalf of
The committee concludes that, given the significance of debt financing
arrangements to its future funding mix, NBN Co should progress consideration of
this matter as a priority. Further, any revisions to NBN Co’s rollout targets will
need to be closely monitored as any delays in this regard may push back
projected timeframes for debt financing arrangements and private equity
engagement (in the form of a direct interest in the share capital of the NBN),
with possible implications for Government equity funding.
The committee also notes that, while the existing legislative framework for
the NBN suggests that there are ‘very limited options for bringing forward
private investment in NBN Co’, this need not slow
progress now in exploring the cost/benefit of different capital structures for
In addition, given that the opinions of debt providers on NBN Co’s
achievements, rollout timeliness and connections uptake will form the ‘key
metrics of credit quality’ critical to its ability to raise external funding,
NBN Co will need to ensure comprehensive performance reporting documentation on
These matters will continue to be examined by the committee over the next
While noting possible revisions in
this area in NBN Co’s next corporate plan, the committee recommends that NBN
Co progress its consideration of debt financing arrangements as a priority.
Telstra Workforce Issues
In implementing structural reform of
the telecommunications industry, the Government’s NBN policy will have a
significant impact on Telstra as the highly integrated and dominant industry
The Binding Definitive Agreements between NBN Co and Telstra form the
basis of Telstra‘s participation in assisting with the rollout of the NBN.
In support of these agreements, the Government has committed to providing
$100 million to Telstra to assist it in the retraining and redeployment of
Telstra employees affected by these reforms to the structure of the telecommunications
Against this background, the committee continues to be interested in Telstra
First and Second Reports
The First Report signalled the committee’s intention to examine
workforce issues related to the rollout of the NBN. However, as a range of key
agreements concerning the NBN were still being finalised by the various parties
at the time of completion of the first reporting period, such as the NBN Co
agreement with Telstra, the committee indicated that it would examine workforce
issues over its second reporting period.
The committee duly considered workforce related matters in its Second
Report, focusing on the Telstra Retraining Funding Deed (RFD). The committee
was particularly interested in the terms of the RFD.
However, the RFD had not yet come into force at the time of the second review
and therefore many of the issues that the committee wished to explore had to be
carried over. It was concluded that ‘more work need[ed] to be done in detail’
on workforce related matters and that investigation of this matter would
therefore be continued over the third reporting period.
Following the Second Review, the committee was interested in more
closely examining the following issues:
n the Telstra
Retraining Funding Deed (RFD)
n the Telstra Training
Plan under the RFD
n Telstra’s workforce
arrangements under the Telstra Stakeholder Management Plan
requirements under the RFD
n projected employment
in terms of the NBN project.
Telstra Retraining Funding Deed
The Binding Definitive Agreements between NBN Co and Telstra form the
basis of Telstra‘s participation in assisting with the rollout of the NBN.
The agreements came into force on 7 March 2012.
In support of these agreements, the Government committed to provide
$100 million to Telstra under the Retraining Funding Deed (RFD) to assist
it in the retraining and redeployment of Telstra employees affected by these
reforms to the structure of the telecommunications industry.
The RFD is set to conclude in June 2019. While the term of the
RFD is for eight years, Telstra may request an extension of a further three
Telstra also highlighted its commitment to ongoing training and
development of its employees, outside of the RFD:
It is important to note that, in terms of our investment in
our people, the $100 million, although substantial, only makes up a small
proportion of the amount we will spend on training, learning and development
over the NBN rollout period.
The RFD between the Commonwealth and Telstra came into force when the Binding
Definitive Agreements commenced in March 2012. The RFD sets out the
terms by which the Government will provide this funding to Telstra to retrain
certain staff over an eight-year period. The objectives of the deed are:
n To support the
availability of an appropriately trained workforce for the NBN; and
n For Telstra to
establish a retraining arrangement for its staff who may otherwise have faced a
redundancy as a consequence of the rollout of the NBN, thereby creating greater
value for Telstra as part of the overall Definitive Agreements package than the
Commonwealth’s cash contribution.
The RFD sets out how Telstra will identify employees eligible for
retraining in NBN related technical, process and system activities; the scope
of training courses to be made available; the standards and quality that must
be met; and the timing of training.
The deed operates by identifying an Automatically Eligible Workgroup
(AEW) and other employees who may be determined to be eligible. The AEW group has
priority for accessing the retraining and includes the Telstra:
n copper and hybrid
fibre coaxial (HFC) based field workforce which undertakes installation and
maintenance and construction and maintenance activity on Telstra’s Customer
n direct field support
workforce which conducts copper/HFC based field workforce support, including
workforce management, workforce and resource planning, and construction program
n support of copper/HFC
operations workforce which provides design of products, management of damages,
network integrity, plant assigning, customer network improvements and contract
n wholesale copper
service workforce which provides the interface between retail service providers
and Telstra in relation to copper services.
The remaining eligible employees are ‘those employees or a class of
employees who may face redundancy unless retrained for redeployment as a
consequence of the decommissioning of the copper network and the HFC network
broadband capability being deactivated’.
Telstra advised that the average age of the group within Telstra
Operations who are automatically eligible for retraining is 45—consistent with
the average age of the broader Telstra Operations workforce, which is 44.
Telstra provided useful background on the history of the agreement and
the workforce implications for Telstra of the rollout of the NBN:
When Telstra commenced negotiations with the government and
NBN Co. on our potential involvement in the NBN, we were very conscious that
the structural changes being imposed on the telco sector, and on us in
particular, would have significant implications for our business and our
workforce. This concern was one of the reasons why we sought the inclusion of
the retraining funding deed in the definitive agreements. Government decisions
around the NBN will have a direct long-term impact on the way Telstra operates
and will have practical implications for our workforce.
Telstra also pointed to other, non-NBN-related, potential impacts on its
workforce composition, including:
...the global changes to the telco sector, for example, the
movement from simple connectivity to the provision of more complex network
applications and services; the changing usage patterns of our customers, for
example, the greater use of data versus voice; the associated convergence of
voice and data networks; the increasing number of our customers choosing to
manage their interactions with us and with other carriers online; and the
activities underway within Telstra to simplify our business processes to drive out
complexity and to improve customer service.
The number of employees in the AEW group as at 1 March 2012 was
6255 employees. As at 31 December 2012,
Telstra had a total of 28 853 employees (excluding domestic controlled
entities, offshore controlled entities, and agency and contract labour)—see
Table 6.1 Telstra Workforce Composition (as at 31
Full time equivalent employees
Domestic controlled entities
(2)Domestic employees: (1)
+ Domestic controlled entities
Offshore controlled entities
(3)Total employees: (2)
+ Offshore controlled entities
Agency + Contract labour
(3) + Agency + Contract labour
a Of the
Telstra paid employees (1), 15,257 FTE are in Operations, 8,625 FTE are in
Customer Sales and Service and the remaining 4,971 FTE are in Corporate Areas
(including Marketing and Products, Finance, HR, Business Support &
workforce includes those employees on long-term extended leave
Submission 10, p. 6
The committee was interested in the total number of Telstra employees
who might potentially fall into the AEW group over the life of the RFD—whether
the size of this group might change, depending on how much work Telstra gained
over time from the NBN—and also the total number of other Telstra employees who
could potentially be determined as eligible for retraining over the life of the
RFD. Telstra explained that:
...it is a pretty stable pool. I do not think we can extend
it terribly much. Obviously if someone else is affected we would bring them in,
but we did think pretty long and hard about who the affected employees would be
and we are pretty confident that, except for maybe a handful here and a handful
there, in broad numbers it is a pretty stable pool. My expectation is that that
is a pretty stable pool.
The committee noted that Telstra employees currently involved in
providing access duct work for the NBN were not apparently eligible under the
Obviously we have a very big contract with NBN to do duct
work and so, to the extent that there are people there, they are not eligible.
We will be doing quite a bit of passive infrastructure work for NBN and those
people are not in the eligible work pool.
Telstra Training Plan
The RFD requires that a Training Plan be developed by Telstra and
approved by the DBCDE. The Training Plan is therefore a significant component
of the RFD. The initial Training Plan covers a three-year period, with
subsequent plans to be lodged six months before the expiry of the previous
The scope of the Training Plan is to identify the training needs,
courses to be developed, approach to course development, training methodology
and targets for retraining. Telstra will ‘give priority to retraining in
NBN-related technical, process and system activities’.
Under the terms of the RFD, the Training Plan must use 70 per cent of the funds
for accredited training, to be delivered by a Registered Training Organisation
(RTO). An RTO must be registered with a state or territory training authority
of the National Audit and Registration Agency. This is regarded as an important
quality measure under the RFD:
Telstra staff will be building on their skills and experience
with accredited training that can be used towards the achievement of nationally
The committee was interested in how these RTOs will be identified under
the RFD. It was explained that:
Telstra is an Enterprise Registered Training Organisation
(RTO), which is an organisation that is registered as an RTO but the principal
business of the enterprise is not training and development, yet its primary
target learning population are its employees. As such, Telstra will be
responsible for the accreditation for a large proportion of the training to be
delivered. Actions are in place to ensure that Telstra will have subject matter
experts with the requisite training qualifications and industry competency, up
skilled to deliver the required training and assess the competency of Telstra
Where external training is required, Telstra will identify
suitable RTOs via standard procurement practices.
The committee also queried the geographic location of this training
delivery, given that eligible Telstra employees are located in many different
parts of the country. Telstra responded that it has:
...a long history of delivering training to all geographic
locations nationally. This training is planned and delivered as part of the
“business as usual” training plan. Resources for NBN retraining delivery will
be planned on an annual and quarterly basis and factored into the Training Plan
to cover the wide geographic area where Telstra employees are located. It is
expected that some employees will be required to travel to training in
The initial draft Training Plan must be submitted to the DBCDE by 30 April
2012 for approval. Telstra confirmed that it was ‘in the process of consulting
with employees, with unions and with the government on the detail of the first
training plan under the deed’ and ‘currently on track to lodge the plan with
the government by 30 April this year’.
While the RFD came into force in March 2012, the committee understands
that these retraining arrangements are therefore not effectively operational
for Telstra staff until the Training Plan is approved by the DBCDE:
The Retraining Funding Deed came into effect on 7 March 2012.
It requires a draft Training Plan be developed and submitted to the Department
by 30 April 2012 for approval and for prior and ongoing consultation with
unions and the Department on retraining arrangements.
Until Telstra receives approval of the Training Plan from the
Department, there is no retraining curriculum to be implemented under the terms
of the Retraining Funding Deed.
This raised a number of issues for the committee. Firstly, as the
Training Plan under the RFD was not scheduled to be provided to the DBCDE for
approval until 30 April 2012, by which time the committee had concluded its
public hearings for the third reporting period, the committee was unable to further
investigate the effectiveness of the RFD and Training Plan.
Secondly, the committee was interested in the gap between the RFD coming
into force and it actually becoming operational. In particular, the committee
was concerned about what might happen to any Telstra employees affected in the
interim who may have been deemed eligible for retraining or redeployment under
the RFD, if it had been operational. This could mean that opportunities under
the RFD were being missed and retraining opportunities were not being pursued.
Telstra responded that:
...the impact of the NBN on our workforce at this stage is
not significant because we still have a large bulk of business as usual on the
copper network and all the work that still goes on with our IP network and the
mobile network and the like. We are really looking at getting our workforce
arrangements in place to deal with the NBN as we know more about it. We still
do not know a lot about some of the network construction arrangements, who is
going to do what, when and where.
Telstra further explained that:
As the draft Training Plan is not scheduled to be provided to
the DBCDE for consideration until 30 April 2012, and employees are not being
affected as yet by the decommissioning of the copper network or the
deactivation of the HFC network as a consequence of the rollout of the NBN,
there is no retraining curriculum to be implemented under the terms of the
Retraining Funding Deed. However, Telstra will consider the circumstances of
individual employees, including the potential for redeployment within Telstra’s
business and to undergo existing Telstra retraining.
The committee therefore understands that, over this interim period, Telstra
will consider the circumstances of individual employees affected by these
changes, on a ‘case by case basis’. Telstra further emphasised
We have a pretty strong preference for retraining and
redeployment rather than redundancy, for obvious reasons. That is the case
whether or not we had the retraining fund in place. Obviously that helps,
because there is a huge body of retraining that has to happen. But at the
moment—and six months ago—we are trying as best we can to identify if there are
other roles within the company to redeploy those people as they stand. So, as
you would know, there are some growth areas and some declining areas anyway,
regardless of the NBN. We have been trying to cycle people through and move
them out of declining areas and retrain them into other areas ... If a person
had a retraining or redeployment option now, it is not like we would wait for
the deed to get up and running before we did that; we would be trying very hard
now to get them across.
The committee was also concerned that there might be some Telstra
employees affected by redundancies currently taking place as a result of job offshoring
who could have been eligible to be retrained, if the RFD had been operational.
The committee was interested in how that group of people might be included in
the short term. Telstra responded that:
On March 26, 2012, employees working within the Switch Data
Network function were notified that three full-time positions in that area
would be made redundant.
Given the draft Training Plan is not yet approved, and that
these employees were not impacted by the decommissioning of the copper network
or the deactivation of the HFC network as a consequence of the rollout of the
National Broadband Network (NBN), Telstra considered the circumstances of these
three employees on a case by case basis.
Telstra further commented, with regard to work within the Network Applications
and Services business ‘where 255 roles were proposed to be made redundant over
a three year period’ (as announced in early December 2011), that:
...these employees do not have the option of training under
the RFD given the draft Training Plan has not been approved by the Department.
However, other opportunities are being considered for these employees. This
includes applying for fifty newly created or vacant jobs within the NA&S
group, where affected employees are given preference. Additional redeployment
opportunities within Telstra are also being sought and some employees have
already transitioned to these new opportunities.
A related issue of interest to the committee was the amount of contracted
work Telstra had obtained from NBN Co, as this obviously had implications for
Telstra’s workforce. Telstra noted that:
Apart from an early trial site in Brunswick, no. Telstra does
not have any design construction work from NBN at this stage ... Clearly,
commercial discussions between us and NBN have to proceed before that happens,
but we are very keen to get that work for obvious reasons.
Telstra further commented that:
As we migrate customers to the NBN and decommission our
copper access network, the network maintenance task that we are currently doing
will diminish with consequences, unfortunately, for our workforce. We have no
certainty of obtaining a construction installation or maintenance contract with
NBN Co. and this also has implications for our workforce. However, we continue
to seek such work from NBN Co. and believe we have much to offer the project
from a design, construction or maintenance perspective.
In the second review period, the committee sought information concerning
a number of Telstra employees who had apparently had their jobs moved offshore.
As part of this third review, Telstra advised the committee, through the
Telstra is committed to recruiting and retaining the best
talent and is one of Australia’s largest employers. Telstra does not have any
policy to recruit overseas workers. However, Telstra continually reviews its
business to determine how best it can serve its customers. This means that we
may work with other companies in the telecommunications industry to leverage
their expertise while we focus more on our core business. From time to time
this means that we restructure the business and this can result in roles
Where roles have been made redundant as a result of a
restructure, significant effort is made to reassign or redeploy affected
employees to suitable roles across Telstra.
The committee continues to monitor trends in this area, particularly
given that the RFD will provide a mechanism to assist in the retraining and
redeployment of Telstra employees affected by the NBN rollout.
An important aspect of the Telstra RFD is consultation with employees
and unions. Telstra has prepared a Stakeholder Management Plan that identifies
employees and unions as key stakeholders. Telstra will meet quarterly with
unions to discuss retraining.A representative from the
department will also attend these meetings as an observer. The committee
understands that consultation meetings with the unions have already occurred—on
4 November 2011 and 19 March 2012.
Reporting Requirements under the Retraining Funding Deed
Under the RFD, Telstra must maintain full and accurate accounts and
records of the conduct of the retraining, the use of funds, and progress against
the training targets and Training Plan. Telstra will provide an annual budget
and provide an audited annual financial report.
Telstra must also provide six-monthly reports to the DBCDE on progress against
the Training Plan, and a more detailed annual report on progress against the
In terms of accountability for the oversight and implementation of the
RFD, Telstra explained that the Human Resources department within Telstra
implements the RFD and that the NBN Transition Team within Telstra is responsible
for its oversight.
National Broadband Network Employment Projections
The committee was interested in the level and value of employment to be
created through the building and operation of the NBN, particularly in the
context of the Telstra workforce retraining arrangements under the RFD. This
employment includes direct NBN Co employment and NBN Co’s purchase of inputs
for the rollout, as well as related companies and industries commencing to
deliver applications and services over the NBN infrastructure and the flow-on
effects to the businesses with which these firms interact.
Given that the purpose of the RFD is to assist in the retraining and
redeployment of Telstra employees, to prepare them to work on NBN related activities,
forward projections concerning the scale and composition of this employment
market are of significance.
Initial estimates prepared by the Australian Government in developing
the NBN policy indicated that the NBN would ‘support up to 25 000 local jobs
every year, on average, over the life of the project, with up to 37 000 jobs at
its peak’. These figures include
jobs created in related sectors that will support or deliver services over the
The committee understands that NBN Co has since established a workforce
development group, which has undertaken an assessment of the tasks involved in
the rollout, the skills required and the corresponding demand and supply for
employment during the rollout construction. The DBCDE submission
noted that NBN Co has forecast direct employment demand for total employment in
the construction phase of 16 000 to 18 000 jobs at peak of construction, with
five key roles constituting some 80 per cent of forecast workforce demand:
n Labourer (5500)
n Earthmoving plant operator
n Road traffic controller
n Cabler (3000)
n Telecommunications lineworker
An important aspect of NBN Co’s job requirements is that the rollout of
the NBN is dispersed across Australia, providing opportunities for local
employment, particularly during the construction phases. The DBCDE submission
further notes that NBN Co’s analysis for the construction of the NBN ‘has found
there are enough people in the industry to meet the skills requirements for the
construction of the network’ so that this activity should not contribute to
In terms of its direct workforce, NBN Co had 1496 employees as at 26 March
2012, and the committee understands that NBN Co is planning to employ up to 2800
employees during the peak of the rollout. Table 6.2 provides
details of NBN Co’s workforce composition as at December 2011.
Table 6.2 NBN Co Workforce Composition
NBN Co headcount
December 2011 (actual)
Total operations staff
Total selling, general and administrative staff
Total headcount (including contractors)
comprised 1,317 employees, 19 contractors and 19 labour hires. This total is an
increase of 449 from 30 June 2011 and 774 from 31 December 2010.
Ministers, ‘Performance Report to 31 December 2011’, Submission 12, p. 16.
During 2011, NBN Co awarded a range of contracts totalling some $4 billion,
the majority of which were for Australian based manufacturing and services, leading
to direct new employment of approximately 700 to 1,000 new jobs.
As the DBCDE noted, while procurement policy is a commercial matter the
company, NBN Co is expected to ‘actively promote opportunities, where possible,
for local enterprises’, including seeking ‘local content and sourcing arrangements
in its major contracts’.
The committee notes Telstra’s statement that it ‘takes its
responsibilities to properly support its employees very seriously. Negotiating
the retraining funding deed, our efforts to redeploy staff and our generous
redundancy provisions are, we believe, examples of this seriousness.’
As the Telstra Training Plan under the RFD was not scheduled to be
provided to the DBCDE for approval until 30 April 2012,
by which time the committee had concluded its public hearings for the third
reporting period, the committee was unable to fully explore the effectiveness
of the RFD and Training Plan. The committee will therefore investigate this
matter in more detail over the next review period, including any impacts in
terms of the gap between the RFD coming into force and it actually becoming
Over future reporting periods, the committee will be interested to
monitor progress under the Telstra RFD in supporting the availability of an
appropriately trained workforce for the NBN and the numbers of Telstra
employees retrained/redeployed and successfully transitioned over into the NBN
sector who may otherwise have faced a redundancy as a consequence of the
rollout of the NBN. Any revisions to NBN Co’s rollout targets will also need to
be monitored as this may affect RFD arrangements and impact on the retraining
and redeployment of Telstra employees.
The committee will also continue to monitor the composition of the AEW—whether
the size of the group might change, depending on how much work Telstra gained
over time from the NBN—and whether other Telstra employees might also be
eligible under the RFD. The committee will be interested in the reporting
documentation produced by Telstra under the RFD. In this regard, the committee
notes that it would be useful to establish some form of public reporting on
progress under the RFD, if this is not already envisaged.
To ensure that the Australian workforce, more generally, has the skills-set
to be able to implement and maintain the NBN into the future, the committee
finds that NBN Co may need to better communicate major areas of emerging
training need and workforce demand in this regard.
In its First Report, the committee recommended that the Minister for Broadband, Communications and the Digital Economy publish a
detailed statement outlining the job benefits of the NBN rollout.In its response to the report, the
Government provided such a statement, entitled ‘Job benefits’. Given the significant level and value of
employment to be created through the building and operation of the NBN and in
the context of the Government’s support for the retraining and redeployment of
Telstra employees affected by these telecommunications reforms, it would be useful
for the Government to publish a detailed statement on this matter on an annual
The committee recommends that the Department of Broadband,
Communications and the Digital Economy publicly disseminate a reporting
document on annual progress under the Telstra Retraining Funding Deed.
The committee recommends that NBN Co publicly communicate
major areas of emerging training need and workforce demand with regard to the
rollout of the National Broadband Network, to assist with future Australian workforce
planning in this sector.
The committee recommends that the Minister for Broadband, Communications and the Digital Economy publish, on an
annual basis, a detailed statement outlining the direct and indirect employment
benefits of the National Broadband Network (NBN) rollout, including in terms
of local/regional employment and major areas of emerging NBN workforce demand
19 June 2012