Friday 19" November 2010 ‘Senator the Hon Stephen Conroy, Minister for Broadband, Communications and the Digital Economy Senator the Hon Penny Wong, Minister for Finance and Deregulation Parliament House Canberra ACT 2600 Dear Senators, | write in order to outline to you the approach NBN Co intends to take in the briefings on our business plan we have been asked to conduct next week for cross bench Members and Senators. ‘As you are aware the plan contains material which is highly sensitive and commercial-in- confidence. Certain information may be of commercial significance in a number of competitive procurement processes which NBN Co currently has underway and those which may be conducted during the life of the project, including commercial negotiations with Telstra and other parties ‘As well, the plan is based on a number of assumptions which are dependent upon Government decisions yet to be taken, most notably the Points of Interconnect decision which is subject to a joint NBN Co/ ACCC public consultation process which does not conclude until November 30, NBN Co's understanding is that these outstanding policy choices by Government will be made in coming weeks. The outcome of the Government's deliberations wil influence the conclusions contained in the plan. www.nbnco.com.au ‘ABN 86 136 533 741 ACN 136 533 741 » +61 2 9926 1900 F +61 2 9926 1901 £ info@nbnco.com.aulevel 11, 100 Arthur Street, North Sydney NSW 2060Notwithstanding this, there are some general points which can be made about the plan at this ‘stage, subject to certain assumptions, particularly concerning the outcome of the Government's policy deliberations: 4. The NBN can be built in a way which provides an internal rate of return higher than the current long term government bond rate. 2. The peak equity requirement of the project approximates that predicted by the Implementation Study. The plan is based on significantly different assumptions, including a deal with Telstra and independent advice on borrowing capacity. 3. Total Capex is substantially below that predicted by the Implementation Study, largely because the Implementation Study assumes no deal with Telstra and the plan assumes considerable re-use of existing infrastructure described in the Financial Heads of Agreement with Telstra. 4, NBN Co has assumed a Uniform National Wholesale Price for its Basic Service Offering (12Mbps Peak Information Rate (PIR) downstream and 1 Mbps upstream - available on fibre, wireless or satellite) which it believes will be attractive in the Australian broadband market place. 5. NBN Co's business plan projects that prices will be reduced over time. Next Steps NBN Co looks forward to receiving Government's response to the plan and to finalising all outstanding policy matters, at which time more information can be made public at the. Government's discretion. Yours Sincerely, Mike Quigley CEO ‘www nbnco.com.au ABN 86 136 533 701 ACN 136 533 741, P #61 29926 1900 F +61 29926 1901 € info@nbnco.com.aulevel 11, 100 Arthur Street, North Sydney NSW 2060