Defence reissues parts of $1.2bn telco deal after Telstra restructure

Defence has been forced to reissue part of a $1.2 billion renewal agreement it signed with Telstra for terrestrial communications services back in late 2021, owing to a legal restructure of the telco.

The department last month issued four new terrestrial communications contracts with a combined value of $34.2 million and a duration to October 2026, the same as the 2021 renewal.

The stated purpose of the four deals was “enhanced telecommunications services”. 

However, unlike on previous occasions, where Defence has incurred additional expenditure on the project, iTnews has confirmed that this $34.2 million is covered by the existing renewal agreement.

The 2021 renewal, incidentally, is officially valued at $1.2 billion, $200 million more than it was reported to be worth at the time, according to AusTender records, which iTnews confirmed.

A Defence spokesperson told iTnews that it had to reissue part of the renewal as separate contracts due to a legal and business restructure that Telstra completed at the start of 2023.

“On January 1 2023, Telstra Group completed a restructure of its business,” the spokesperson said.

“This restructure meant Telstra’s customers, including Defence, made a number of administrative, contractual and financial changes to align with the new corporate structure. 

“As a result, Defence needed to re-issue purchase orders, which have now been reported on AusTender.

“The $34.2 million of contract notices referenced are related to this activity and are not new expenditure.”

The spokesperson added that some contracts issued under the arrangement with Telstra would ultimately also be withdrawn.

They did not specify which ones, nor whether these were ones that were struck under the old or new structure at Telstra.

Millions more spent

While the latest set of contracts does not represent new expenditure, an analysis of contract notices issued by Defence since the $1.2 billion renewal shows that the department has indeed commissioned Telstra for additional work that is not included in the renewal amount, totalling $24.1 million, since late 2021.

The $24.1 million is split across 53 mostly low-value contracts described as being for “computer services” related to ITR CIOG106/10, which is a codename for JP2047 Phase 3 of the Defence Terrestrial Communications Network or DTCN.

The spokesperson said these additional contracts are “associated with Defence capability growth beyond the $1.2 billion”, without elaborating.