The federal government has cancelled a $958 million contract with the OPEL consortium for the roll out of wireless broadband infrastructure in rural and regional Australia.
Futuris and Singtel, the parent companies of OPEL members Optus and Elders, both announced to the market this morning that the contract has been cancelled because the government believed prescribed coverage requirements would not be met.
The “material risk of duplication” between the OPEL wireless rollout and the government’s $4.7 billion fibre to the node program was also a reason for the cancellation.
Questions will now be raised over whether either of the OPEL members will seek to recover any of the funds already sunk into the project.
Elders parent company Futuris was cagey on the subject in its statement to the market, saying: “In the absence of any recoveries from the Commonwealth, Futuris anticipates a provision of approximately $15 million will be made in the current financial year as a non-recurring item.”
David Kennedy, a broadband expert with technology analysts Ovum, says the move isn’t a surprise given Labor’s long established negative view of the OPEL deal.
Significantly, Kennedy believes the OPEL cancellation will make the Government’s fibre to the node program a more profitable prospect for tenderers.
“It makes it clearer and what sort of competitive environment the fibre to the node infrastructure will be rolled out into, the target is to reach 98% households so the removal will improve the viability of the network in that it won’t be competing with OPEL infrastructure in rural and regional areas,” Kennedy says.
Kennedy agrees the cancellation is something of a win for Telstra because it is widely considered the most likely winner of the fibre to the node tender, but says there may be some silver lining in the move for Optus as well.
“It means Optus can focus on the fibre to the node bid and stop worrying about OPEL, so they lose this project but it will free up management and financial resources for the main game,” Kennedy says.