Australian telco’s plan to return money to shareholders and pay down debt blocked by national broadband firm, which says deal would not be in its best interests.

NBN on Wednesday said it would not consent to Telstra’s plan to generate up to A$5.5 billion in cash from its predicted future revenues from the national broadband network project.

The decision is a blow to Australia’s telecoms incumbent, which had planned to return the bulk of the sum raised to shareholders.

The telco’s shares have fallen sharply since its full-year results announcement – at which it announced plans to reduce dividend payments – and continued to fall on Wednesday’s news, closing at A$3.60.

Telstra also shared some details of its plan to securitise future revenues from NBN at its results presentation. In a letter to shareholders it said its aim was to monetise 40% of its expected long-term receipts from NBN, for dark fibre and exchanges, raising A$5 billion-A$5.5 billion. It intended to use A$1 billion of the total to pay down debt with the remainder going to shareholders, most likely through buybacks.

The operator said its plan would require various approvals, including that of NBN. The company charged with running Australia’s next-gen network project does not see the benefit of agreeing to such a move though.

"NBN is not prepared to accept the reduced flexibility in unforeseen revisions to our existing agreements," it said on Wednesday. "The risk is difficult to quantify but our primary responsibility is to protect the interest of our investors, the Australian tax payers."

Separately, Telstra admitted that NBN had said it could not see how its own position could be improved as a result of the securitisation plan, particularly given the unpredictability of the operating environment in the coming decade.

NBN insisted it had given "serious consideration" to Telstra’s proposal but had concluded it was not in its best interests. It highlighted concerns that such a move could impact on its decision-making capabilities in the long term.

"Thanks in part to a strong working relationship with Telstra, the company is making significant progress in its delivery of the NBN network in a fast changing telecommunications market which will evolve rapidly over the coming years," NBN said.

NBN reached 6.07 million premises, including satellite and wireless coverage, by 24 August and had 2.77 million premises activated, according to its latest weekly progress report.