Telstra NBN agree to work together ahead of final agreement

While the Australian government and Telstra have put the days of open confrontation officially behind them, the peace treaty between the two set out in formal announcement for a potential deal on the national broadband network remains worded in extremely vague terms.

The polite talk of agreement on "terms of engagement", hides the big squeeze on Telstra that comes from two directions – Canberra and the market - and analysts say the simultaneous announcement of lower-than-expected "flattish" revenue serves to underline the just how difficult life is these days for Telstra chief David Thodey.

The major issue is the payment for Telstra's participation in the new fibre network. Analysts say the agreement announced on Friday was focused on two issues- migration of Telstra's traffic from its existing copper network on the basis that it will be closed down rather than competing with fibre, while the other is the terms on which Telstra would lease out its exchanges and ducts in order for NBN Co to make the fibre rollout to individual premises.

Telstra, NBN Co and federal communications minister Steven Conroy acknowledged that much complex negotiations remain, and these may be constructive.

"While there are many complex issues still to be resolved before any final agreement is reached, I remain optimistic that both parties can find a mutually acceptable outcome," Senator Conroy said in a statement.

"The update on progress made today by Telstra and NBN Co demonstrates that both parties continue to work constructively."