Coles Group Limited (ASX: COL), Optus and NBN Co just teamed up to deliver an earnings hit to Telstra Corporation Ltd (ASX: TLS).
According to AFR reporting, NBN Co is going to work with Optus to build a fibre broadband network for Coles that will see Optus replace Telstra as Coles' internet provider.
You can guess that Coles isn't spending just $100 a month on its broadband requirements, this deal is likely to be a significant hit to Telstra's earnings considering the size of Coles.
NBN Co will be responsible for doing the initial legwork to lay fibre optic cables to every Coles supermarket, liquor location and convenience store in Australia. It is going to be a large deal.
The AFR speculated that this deal could be worth around $100 million. As part of the deal, Optus will become part of Flybuys and Optus products and services will be sold in Coles stores.
Once the multi-year deal with Optus expires, Coles will still be using NBN-owned cables but it will have the option to move away from Optus.
Coles chief information and digital officer Roger Sniezek was quoted by the AFR as saying "The increased speeds and capacity of this new network give us the flexibility to rapidly increase the speed at which our stores can access and transfer data. We are delighted to be partnering with Optus to leverage the speed, flexibility and agility of the new network, implement new digital initiatives, and ensure we are well-placed to take advantage of emerging technologies in coming years."
You can imagine Coles will use this network to also provide a better (and more alluring) shopping experience to customers once it is installed.
Foolish takeaway
Whilst it's interesting to see what Coles is doing, this is another disappointment for Telstra that seems to be losing the competitive advantage that it used to have. I wouldn't want to be a Telstra shareholder for at least a year or two until the economics of 5G becomes clear.
