The division, which came into effect in the 2018-19 financial year, houses the telecommunications provider's fixed-line infrastructure, including data centres, non-mobile related fibre, copper, hybrid-fibre coaxial, international undersea cables, exchanges, poles, ducts and pipes.

"If we're a vertically integrated business, competition authorities would never allow us to do anything with NBN. But, you can see a lot of potential synergies between the Telstra InfraCo and NBN," Mr Mullen said.

"If we get it to the point where we've only got very little work to do to physically separate and delist that company, then there are potential options on the table. Whether that will ever add value, who knows, but I'd like to be in a position where we have that option to move quickly if it suits government."

Little room for margins

It remains unclear exactly what type of transaction combining InfraCo and NBN Co would be, given Telstra is unlikely to have the appetite to pay $49 billion for the project and the government has repeatedly signalled it will not write-down the value of the business, despite widespread pleas to do so, to ease wholesale pricing.

Telstra is unlikely to have the appetite to pay $49 billion for the NBN and the government has repeatedly signalled it will not write-down the value of the business. Rob Homer

The two businesses could be combined and potentially spun-off to investors looking for low-risk infrastructure plays with a steady income. It could also potentially ease wholesale NBN prices.

The problem lies with the fact that in order to make its commercial return, NBN is trying to charge retail service providers (RSPs) more than they are willing to pay for capacity.


NBN has a target average revenue per user of $52 that it needs to achieve to pay for the build out. This includes the payments it makes to Telstra to pay for the use of Telstra's ducts, rack space in exchanges and access to pits. Those charges equate to about $15 per user.

With the majority of Australians unwilling to pay more than $60 for internet and telcos looking to capture and retain customers, there is little room for margins.

Despite adding more customers over the 2017-18 year, the revenue Telstra earned from fixed-line data services, or selling internet connections, fell 9.2 per cent to $5.8 billion.

Earnings before interest, tax, depreciation and amortisation (EBITDA) margins nearly halved to 16 per cent in 2017-18, compared with 31 per cent in 2016-17. Five years ago Telstra's fixed-line data margins were 41 per cent.