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I think the Liberals have

popped the pa loan of the

Greens in - balloon of the

Greens in Victoria, I think the

Greens will be last on a lot of State

Gillard needs to learn from

here that you can defy the Greens and there are votes in

it. I think it's really ripped

off their mantle of being

impregnable. I think it will be

really interesting. This may be

the high water mark of the Greens. That's the program for

this week. Our final program

for the year will be next week,

when we'll look back over some

of the more bizarre absurd

moments. From that long list

we'll name the Matt Price

moment, in memory of our former

colleague and great friend.

warm-up We'll leave you now with a

Federal Parliament get ing warm-up for 'Offsiders' -

behinds Australia's bid for the

watching. 2022 World Cup. Thanks for

CSI I'm sure you're wondering why everybody is so resplend

ent in their 'Come play' scarfs today, decision time in Zurich

begins. Australia is the

undisputed champion of the

world at running, sporting

events. It's a great bid, deserves a great result. We deserves a great result. We ran

the world's best Olympics. Years of planning, striving. We ran the world's best Commonwealth Games. All

come down to the vote. We

run the world's best soccer

World Cup if we get the chance. Our nation is unite end anticipation and bonded

together by hope. This Program Is Captioned

Live. Good day, welcome to the program. This week the national

broadband network finally had

its business case laid out for

all to see. Well, actually it

was just a summary. No figures.

Not much in it at all in fact.

As a result, everyone is still

arguing about how much it will

cost and whether it's worth it.

So we went and asked the man

with the business case in his

head, the NBN chief executive Mike Quigley. The other

business case of the week was

Qantas getting its new A380s

back in the air after that

nearly disastrous engine

malfunction over Indonesia on

QF32. Engines can be repaired

but what about reputations?

We'll ask Qantas boss Alan

Joyce. We're very conscious of

making sure that people are

aware of how severe and how

strongly we regard safety and

we will do whatever it takes to

make sure that we maintain

safety as our top priority.

The 13.8 billion cheque for

Telstra is not in the mail but

on Friday the Senate licked the

stamp, meaning Australia's

historic copper communications

network laid by the M PMG will

be scrapped and replaced. This

week the Government bowed to

the not entirely unreasonable

demand by Nick Zenophon to see

the business case for the NBN

before voting. What he got was

business case lite but hey, it

was enough. I spoke to NBN co

chief and the man who knows the

full business plan, Mike

Quigley. The internal rate of

return was not revealed in the

summary of the business plan

released the other day. Can you

tell us what it is? No, I

can't, Alan. The internal rate

of return, the shareholder the

Government may decide to

release that in due course but

it's not something I can talk

about at this time. It's

suggested the internal rate of

return is below your cost of

capital over the life of the

project. Is that correct? I

think that's a fair statement,

yes, and as you know the

weighted average cost of

capital in our assumptions goes

down over the years as the

project progress dpz the

uncertainty reduces. Why do?

I think that's fairly obvious.

This is an asset that will be

of value to the nation while we

in NBN Co have done a business

case, developed a business case

based on costs and revenue

weecht have not tried to factor

in external benefits but clearly there are external

benefits and that's a decision

of the Government, that this is

a project which has national

benefit. You're saying the

destruction of value that

naturally occurs if you have a

project that earns less than

its cost of capital is made up

for by nonfinancial benefits?

I wouldn't characterise it as a

destruction of capital. I would

say that the project will

return - will have a return

above the Government bond rate

and in addition is going to

generate a bunch of external

benefits which haven't -

numbers haven't been put on

those but there's plenty of information overseas

particularly from places like

Japan where they've done estimates of such benefits.

They're substantial and I think

that has to be factored into

the overall case but that's not

a job for NBN Co. Our job is to

look at costs, look at revenue

and work out a return we can

give to the Government on the

money that is invested in the

company. Can you understand

why some people would say the

nonfinancial or external

benefits you talk about should

be spelt out and made

transparent in a cost benefit

analysis? I think it's a

legitimate question to ask. I

think it's a question really

though that you need to be

asking our shareholder, the

Government. The job we've been

given to do in NBN Co is to

build this infrastructure, this

project, on the basis of the objectives the Government has

set for us and that's what

we've gone about trying to do

as professionally and defishly

as we can. Can you tell us what

your capital base? We're

assuming a 27.1 billion equity

injection over a period of

years by the Government and the

difference between that and our

peak funding requirement, we

will source from debt, we have

made an estimate internally,

our Chief Financial Officer has

a lot of experience both in

debt and equity markets. He was confident that we could do

that, given our assumptions in

the business case, and we also

had that confirmed by our

investment bankers, Goldman

Sachs. They also gave us

assurances that we could raise

the debt. Can you tell us what

that gap is between the equity

and peak funding requirement,

the debt? It's not made

public. Can you tell us how

much cash you expect to spend

before you break even as a

business? Off the top of my

head I can't tell you that

number. I should check. Do you

think it equates to the

equity? That one also I'd like

to take on notice. The figure,

I think, of about $35.7 billion

has been placed on the cost of the whole project. That's

right, isn't it? That's the

Capex cost up to mid 20 20

which is the end of the build

period so that's the total

capex. Does that include the

money to be paid to Telstra?

No, the money we pay to Telstra

is in two elements. There's an

element which is for decommissioning the copper

network on a per line basis and

there's an element which is

related to leases for

infrastructure and those, both

of those elements are in our

operating costs. Is it

reasonable to add up the two

numbers, the capex, 35.7 and

the money paid to Telstra, to

come up with the total cost?

No, it's not a reasonable thing

to do. They are two different

buckets and when you're looking

at the total opex costs, in

taking on those additional opex

costs we, in our business case,

we get considerably higher

revenues as a result of that.

Because we did a base case to

which we had to compare when we were negotiating the Telstra

deal and that base case had a

different Capex, obviously

number to our final deal case,

a different opex number and a

different revenue number so the

deal is absolutely positive,

it's positive for Telstra, it's

positive for NBN Co and a

result of that deal we pay opex

costs higher than we would in

an ideal case but we have

higher revenue The internal

rate of return is improved by

the deal with tels?

Absolutely. can you tell me by

how much? I know but I can't

reveal that number. I can tell

you it's substantially better

otherwise we wouldn't have done

the deal. Can you tell me how

sensitive the internal rate of

return is to the number of

points of interconnect? Not particularly sensitive and if

in tact the outcome from the

ACCC review is such that

uniform national wholesale

pricing is a result then there should be very

should be very little impact on

the overall business case of

NBN. Our concern of course, and

one of the reasons we were recommending centralised points

of interconnect, was to achieve uniform national wholesale

pricing which was a clear

Government objective. If that

objective can be achieved

another way we're perfectly

happy. The industry's very

upset at your proposal to have

a minimal number of point of

interconnect, 14 in fact,

because they say that will

leave lots of their existing capex stranded. It's fair to

say there's elements of the

industry, understandably, who

have already invested in back

haul transmission to WHO would

be concerned and obviously

their concern relates to what

transmission they have in what

places. There's also elements

of the industry who are very

happy with central sized points

because they realise it will

provide a more level playing

field and it means that they

can serve people in regional

areas absolutely at the same

costs as people in cities.

That's an issue that the ACCC

is working through. They'll be

giving recommendation to

Government and we're working

very closely with them and we

will, in NBN Co, implement

which ever solution the

Government finally decides

on. I guess the key question is

whether - if you're forced to

have a significantly more

points of interconnect, whether

that will materially reduce

your rate of return. No,

absolutely it won't. What we

gave an estimate of between 50

and 80 basis points for the

possible impact but that's kind

of worst case. If the solution

that the ACCC recommends produces uniform national

wholesale pricing then there

won't be much of an impact at

all because it will mean our

revenue will not be impacted.

The reason by the way largely

for that 50 to 80 basis points

is because if there's not

uniform national wholesale

pricing there will be whole

areas of the country that you

won't have much competition

with at all, in the same way as

today there are not competitive

deslams everywhere in the

country. Isn't there a basic

trade-off? The cost of uniform

national pricing is a

monopolistic buyer of back haul

capacity which is yourselves

whereas most people would say

in the ACCC that competition is

a better thing, that - because

particularly in back haul

because we're going to have a

monopoly customer access

network in the NBN so it would

be better to have competition

in back haul. This is

absolutely a trade-argument as

I have mentioned to you before

Alan y was in private industry

for 36 years so I'm not averse

to competition. It works

extremely well. There are some

circumstances, and this in our

view could potentially be one

of them in which, especially

with advancing technology, a

build of an incremental amount

of back haul, which is what we

would be doing because we have

to build already a lot of back

haul, an incremental amount of

back haul for which we don't

need much return on that would

have very little impact on

overall prices, whereas what

you've got is multiple

facilities of back haul,

everybody trying to get a

return on that. Now this is

clearly a policy and industry

structure issue and it's really

not up to NBN Co to try and

make those calls. It's an ACCC

and a Government issue. We just

try to make sure in making

those decisions that Government

was fully informed on the

options. Has the heightened

political debate in recent

weeks had an impact on you and

the NBN team? We've probably

got less sleep than we

otherwise would. There's been a

lot of work to do. Some of

these issues are difficult and

complex and we understand that and. We understand also this

isn't just a normal commercial

company, this is one involved

in what has become a highly

political industry-changing

initiative so it's not

surprising that there is a

degree of debate. We didn't

expect it to be a straight

forward path such as I had been

used to in the normal

commercial world. You're

saying it's not surprising with

hindsight but were you actually

surprised? I was surprised

that - I didn't expect it

perhaps to become quite this

political but we are where we

are and we just take a day at a

time and frankly take it in our

stride. Thanks very much for

joining us, Mike Quigley. A

pleasure. Now with the latest

business and market news it's

over to Jayne Edwards. We've

got a negative lead in to our market tomorrow after Wall

Street finished a shortened

session on Friday firmly in the

red. The Dow and the broader

market lost nearly 1% while the

Nasdaq held up a little better.

Jitters over European debt and

tensions between north and

South Korea cast a shadow over

the week on world share

markets. A bail-out deal for

Ireland that's deeply unpopular

in the Republic has failed to

calm the worries of analysts

and investors in Europe and

despite denial, speculation continues that Portugal and

Spain may be next in line for

EU assistance. All that caused

a sharp lift in the greenback

as investors sought a safe

hasken currency. It was enough

to put a dampener on stocks

despite a strong start to the

US retail season with up to 138 million shoppers expected to be

out spending this weekend in

the post Thanksgiving sales.

Over the week, all the major

share markets except Japan lost

ground with Europe sliding by

4%. Now with local market news

here's Tom Elliott. As you just

heard the share market fell

over the week, as always

however, there were a mixture

of good and bad news stories

out there driving share prices.

Firstly a couple of good news

stories. Recently Telstra shareholders haven't had too

much at all good about their company's share price, however,

as the Government inches closer

to a deal wn the NBN, Telstra

shares did recover and were up

around 9% over the week. In

another surprise, QRN shares

performed particularly strongly

from the institutional IPO

price of 2.55 on Monday. The

stock closed around 11% and it

seems local institutions might

have been a bit too clever by

half in not applying for as

many shares as they wanted,

thereby forcing them into the

secondary market. National

Australia Bank's shares were

done. The bank has got ongoing

pay roll glitches. Gerry Harvey

is one of the most candid CEOs

in the Australian share market

and he said the conditions as

they head towards Christmas for

retailers were very, very bad

as a result of the share price

of Harvey Norman, JB Hi-Fi, Myer and David Jones fell throughout the week. Channel Myer

Ten shares were weaker. I think

many people were thinking there

might be a takeover bid

launched for the company but of

course even though Gina

Rinehart has bought 10% of

Channel Ten it seems unlikely

that she will make a full bid.

Still, many people do think

further corporate activity for

the stock is likely down the

track. Also Fosters shares, the

company really has been in the

wars a bit lately. It's got

weak markets over seas and now

an adverse tax ruling that's

sent its stock down 1.4% over

the week. The winner of the

week is sun dance resources up

26% after rumours emerged of a

finance deal for its ws African

iron ore project. Loser of the

week is Aristocrat leisure,

down 22% of a large profit down

gride graied on which it blamed the strong Australian Dollar

and weak overseas markets. By

any measure it's been an awful

month for Qantas. The

potentially devastating

disintegration of an engine in

a new A380 with 466 souls on

board spawned a global media frenzy and the incident over

Indonesia was quickly followed

by a succession of other

mishaps and can turnbacks and

just this week a pilot at

Jetstar was sacked after

criticising the off shore

employment policy and the

effect it could have on safety.

More head lieningedz, more

damage control. By the end of

the week Qantas did manage to

get two of its

multibillion-dollar A380 fleet

back into limited service with

the boss, Alan Joyce, on board.

Appearing comfortable and

relaxed of course. I spoke to

him before he boarded the

flight to London. Alan Joyce,

how do you reconcile the

sacking of Joe Eakins, the

Jetstar pilot, for raising safety concerns when you've

always said that you would

never discipline anyone for

raising safety concerns? In

this case, the pilot in

question didn't raise safety

concerns s. He raised issues

that are industrial relations

issues related to employment in

Singapore and relating to

progression within the

organisation. Nothing to do

with safety. He did say lower

pay you're paying in Singapore

will lead to safety problems.

What the pilots in Singapore

are actually employed to fly

for Jetstar Asia which is a

Singapore entity, are flying and competing against all of

the carriers in the region and

the pilots are paid quite well.

They're paid in the top few per

cent of the population in that

country so there's no issues

here with safety and I think in

the case of this pilot, he did

break the code of conduct. It

was very clear what the code of

conduct for the organisation

is. That was broken on multiple

occasions. He was given

opportunities to come in and

talk about why he was doing it

and to correct the action. He

refused to come in and talk to

the management. The management

were left with no other action

but to actually terminate his

employment. There were other

pilots - there was another

pilot doing the same thing and

the process end would that pilot understanding what the

code of conduct was and he

stopped the conduct. I have to

say Jetstar, like all of

Qantas, really takes safety

reporting as a top priority. We

get thousands of reports every

year that we pass on to the

ATSB and a lot we look

autoourselves. We gout out and

encourage reporting related to

safety issues. When something

is related to industrial

relations issues and a breach

of the code of conduct we're

going to act in that way. For

the union to use this as an

example and say it's about

safety is them using the safety

card for industrial relations.

It's purely that yet again. It

is outrageous that they keep

doing this. It's not a good

look for you at the end of a series of five incidents.

That's the problem, isn't it?

You've actually had - you seem

to have a safety problem right

now. You look at what

occurred. The issue that

started this was the issue on

the A380 which involved a very serious failure on a Rolls

Royce engine. It was a new

engine and it was absolutely

clearly nothing to do with anything Qantas was doing. It

was an engine that didn't

perform to the parameters we

would have expected. The other

issues that have occurred

happen in the aviation industry

every day. Last week there were

a couple of turnbacks that got

lot of reporting. Last week

there were two turnbacks for

Virgin and one for Singapore

Airlines. It happens all the

time around the industry. The

first event was a serious event

but again I emphasise it's

nothing to what Qantas had done

in relation to the aircraft, it

was a flaw in the design of

that engine. How much has this

cost you? It can't have been

cost-free? It isn't. It's

ongoing at the moment in terms

of the cost because while we've

got two the A380s now back in

the air and two of the aircraft

are flying, we still have four

aircraft that we're working to

get back into service and we

also have restrictions on where

we're flying the aircraft

voluntarily imposed so the bill

is still mounting and when we

have a firm number about what that will cost we will

communicate that. Do you have

a sense of the reputational

damage, set to the cost, are

you surveying reputational

damage? Yes, we are looking at

the issues about our brand. I

think from the research we're

getting and the feedback we're

getting from customers, there's

a lot of positives in what

we've done because our

customers are saying we

grounded the aircraft, we took

the big step to ground the

flagship in our fleet and kept

it on the ground for now over

20 days until we were

absolutely sure it was the

right thing to do. People are

aware this is a Rolls Royce

problem so when we surveyed the

general population, the vast

majority know there's a problem

with the design of the engines

and the compliments we're

getting are for how Qantas

handled it, how the pilots,

cabin crew and organisation

handled it will do our brand

good in the medium to

long-term. We're very conscious

of making sure that people are

aware of how severe and how

strongly we regard safety that

and we will do whatever it

takes to make sure that we

maintain safety as our top

priority. What are you doing

as CEO intermly to ensure

there's no common threads? You

must be looking at all this and

thinking, "Well, OK, I've got a

reputation issue to deal bewith

and a cost issue but what do I

have to do to make sure there

are no issues internally?" We

have a very comprehensive

safety management system. Are

you changing them? Are you

doing anything different?

Obviously Qantas has had

systems in place for a long

time. That's why I think time. That's why I think Qantas has the safety reputation it

has. We do look at these issues

and identify what we can do to

improve safety. Again, looking

at them, these issues, I think,

demonstrate a strong positive

safety callture because when we

found out a problem with an

engine that had the design

issue we grournded the fleet

until we knew how we could tiks

the issue. We were not going to

put the aircraft back. That's a

tick for the safety management

system and safety culture. When

you look at the turnbacks, the

second issue was an aircraft

with Perth that went to

Melbourne and turned back that.

Rrt a real positive safety

issue because you want your

pilots not to take any risks.

You want your pilots to return

the aircraft to base if they

regard any potential problems.

The airlines to worry about are

the airlines that would go on

and that was a positive. These

issues, it's not uncommon for

in-flight shut-downs too occur

around the world. There would

be hundreds that take place

every year. It's how you handle

them and manage them. These are

complex aircraft, complex

pieces of machine ry we're

dealing with i.sz horthe

airline handles the events and

each of these I can see Qantas

performed exceptionally well.

I understand you're not putting

the A380s back on the Pacific

route to LA. Why is that? What

we're doing is we've decided

talking to Rolls Royce and

their boys that for a period of

time until we have seen how the

engines perform that they'll

voluntarily we don't oppilate

them out of that airport

because you need to operate

them at a higher setting for

the longer distance. Out of

LA? Out of LA. I have to say

when you look at these engines they're absolutely designed to

do that. The engines, we have

have a huge set weeing don't

get anywhere near when we use

them but we are being very

cautious which we reintroduce

the aircraft to make sure we

understand how the engines are performing. Have you been

testing them on the extra

thrust that's required out of

Los Angeles? The extra thrust

has been certified on the

aircraft. If you look at the

thrust levels of the aircraft,

the aircraft are certified ufto

70,000 pounds of thrust, the

engines is designed up to

80,000, Qantas is operating at

72,000 and some engines out

there are operating at 100,000

pounds of thrusz. This is an

issue we're voluntarily being

conservative on. The engines

will eventually be able to

operate again on this route but

we're just making sure we're

very comfortable with it before

we put it back on. Thanks for

joining us Alan Joyce. Traditional media organisations

have themselves become the

stOry as they strugglual the

effect of digital revolution on

newspaper sales and advertising

revenues. Fairfax media, owner

of the 'Sydney Morning Herald', 'The Age' and the Australian 'Financial Review' had a stab

at reconciling the tensions

between new and old needia this

week with a management

restructure but the words deck

scmarz titan ic string to mind.

Neal Woolrich reports. - deck

chairs and can 'Titanic' spring

to mind. The digital revolution

might well be the biggest shakeup in written communication since Gutenburg

invented the printing press 600

years ago. Trying to make sense

offence it and make money is

one of Australia's oldest media

names, Fairfax. These are

exciting times with media

companies around the world

facing huge change in the way

people consume media.

No-one's got the answer. That's

the really important thing. No-one has really got the

answer. What is absolutely the

case is that paid applications

today alone will not offset the

decline in paid circulation of

your print product and that's

the crucial issue here. This

week, Fairfax media chief executive Brian McCarthy hosted

an investor briefing to outline

the company's plan to deal with

a rapidly changing media

landscape. Hello, everyone.

In a video message to staff he

said Fairfax had a 5-poiB

strategy which included an

internal management restructure

too save an estimated $10

million a year and a goal to

make money wherever possible

from online and digital applications. Our strategy

will enable us all to embrace

the future ors a highly competitive, successful and profitable business in

Australia, New Zealand and in

the United States. In short, to

future-proof Fairfax media and

strengthen our position as one

of the world's leading

multiplatform companies A

positive step identifying that

operational costs going forward

is important and there's cost

save thrtion. A positive it's a acknowledging the

diversification of the business

going forward and they are reinforcing the cheem which is

important because media companies today are different

to where they were 5 and 10

years ago. But mother veszers

were not so forgaving. - other

investors were not so

forgiving, criticising the

briefing for lacking practical

applications. Gerrard Noonan

has ink in his veins, the

former editor of Fairfax's

'Financial Review' says the

company's crit,s are expected

too much and need to give the

new strategy time. I do think

that the investment community

elikes to posture a lot and the

analysts like to posture a lot

on this sort of stuff as though

they really do know what's

going on within these

companies. I mentioned earlier

the tendancy for them to think

that News Limited has got it

right. I don't think that right

at all. News corporation's

times of London became the

first British paper to charge

for online content when it

erected a paywall in July.

Newscorp has sold 105,000

digital products in either

monthly subscriptions or

one-off downloads but that has

come at a huge cost Before its

paywall strategy, times.co.uk

had 20 million unique visitors

a month. In total now, including its subscription

brace, it's got 200,000 per

month. That's a 1% conversion

rate. They're a long way from

actually proving that this is a

long-term sustainable

model. That means the 'Times'

is dloping off the radar for

advisers and the problem for

the broader industry is fresh

sources of revenue like paid

applications are a long way

from providing salvation even

for the free sites. 'The

Guardian' had real success

earlier in the year. They were selling an application for selling an application for

?2.39, they hit about 100,000

downloads. That's over 200,000

stirling in revenue and then

obviously you have to give

Apple its 30% slice for selling paid content through that

channel. Now it's a diminished

amount of money that is coming

from those newspapers but

newspapers, remember, for

decades lived this sheltered

life of fantastic flows of

money and they had returns on

equity in the order of 30 and

40%. That was always an

unrealistic matter. It was

sustained by the fact there

were heavy barriers to entry

because of news presses. UbS

head of investment strategy

George Boubouras argues Fairfax

is trading a at an attractive

price compared to local and

international peers because

investors remain uncertain over

when whether the company's diversification strategy will

work. Fairfax are being

successful from a bespoke

nature charging for the 'Financial Review'. They need

to expand the concept going

forward so the jury's out

whether you can monstzatise

and-T and leverage it going

forward. Cut it down to quality

of content and that's the key

going forward. Certainly the

business model that underpinned

great journalist and good

newspapers is breaking down.

There's No Doubt about that but

it is also true, and I think

Brian McCarthy did make mention

of this, that's the largest

tranche of revenue that is

still coming from the

newspapers. However, the key

for Australian newspapers is to

convince readers to pay for

online content that until now

they've been getting for free

and that one revolution that

even smart phones and reader

tablets might not be able to

engineer. And that's it for the

program. Transcripts and a

video and a vodcast of all

today's stories and interviews

will be available on our

website a bit later on. Thanks This is captions test to 'Offsiders'. This is a captions test for 'Offsiders'. This is captions test.

The Australian cricketers

never lost the faith, many of

their supporters did. Now that

faith is well on the way to being

taking a real grip on the first

Test in Brisbane. That is