Given the critical nature of the infrastructure up for grabs, Telstra may have faced issues with the Foreign Investment Review Board had it sold a stake to a foreign buyer or a consortium with members from overseas. But FIRB is hardly going to turn down the Future Fund.
A lot of key stakeholders are going to be very comfortable with them, particularly given the nature of the underlying assets, Penn says.
Finally, and perhaps most importantly, Penn says the consortium was willing to back network leadership being a key pillar of his T22 strategy to transform the telco.
Maintaining and enhancing the network as the nations data needs inevitably increase will require investment, so partnering with firms with a long-term view and the capital to support that investment was a key criterion.
Marko Bogoievski, chief executive of Morrison & Co, which stitched together the deal and will manage the investment on behalf of the consortium, says a key to making an offer that could successfully pre-empt the auction was to come up with a structure that met Telstras specific needs. A commitment to keep improving the tower network was particularly crucial.
He says a problem with similar transactions around the world has been strained relationships between the infrastructure owner and their major customer.
We are taking the exact opposite stance, Bogoievski says. The way to be successful is to make sure theyre successful.
The consortiums focus, he says, will be making sure Telstras service arm gets what it needs, particularly around access to existing towers and new towers as required.
The $2.8 billion deal will trigger a capital return of about $1.4 billion to shareholders, which helped lift Telstra 4.4 per cent higher on Wednesday to a 52-week high of $3.78. The stock is now up 20 per cent over the past 12 months and 25 per cent since the start of 2021.
Clearly, the return will be welcomed by Telstra investors. But Penn also argues it is symbolic of the progress made under the T22 strategy, which is 75 per cent complete.
Monetising Telstras infrastructure was a key plank in Penns push, so getting one of these deals over the line should build confidence that Telstra can deliver.
It takes a bit of the unknown out of the equation, Penn says. Were starting to bring forward these proof points.
Its very much a third-order benefit, but getting the deal done ahead of November, when Penn is scheduled to update the T22 strategy, probably doesnt hurt his case to extend his time in the top job.
With the complicated legal separation of Telstras infrastructure company still to be completed, and any monetisation deals still some way off, the towers deal represents handy runs on the board.
