Aust approves A$3bn telecoms spend on bush services

The Australian Federal cabinet has approved a A$3 billion ($3.3 billion) boost for telecommunications in the bush as it tries to drum up support for its plan to sell Telstra.

The telco will also be subject to tougher regulations and made to split its wholesale and retail businesses to improve transparency for its rivals.

Prime Minister John Howard and senior cabinet ministers last night approved a package of sweeteners, including A$1 billion to roll out broadband internet services in the bush.

Cabinet also ticked off a A$2 billion trust fund, suggested by Nationals leader Mark Vaile, to pay for upgrades to telecommunications services after Telstra is sold.

In backing the A$3 billion package put forward by Communications Minister Helen Coonan, cabinet effectively knocked back Telstra's A$5 billion plan to upgrade its network.

Telstra chief executive Sol Trujillo last week urged the government to contribute billions of taxpayers' money to the plan.

A Telstra spokesman said tonight the telco realised its suggestion was made too late.

"We know that our proposal that was to bring high speed broadband to 100 per cent of Australian homes came in late and it was an uphill battle to get that passed (by cabinet)," the spokesman said.

"The decision today was not a decision that Telstra would have made nor we suspect would our customers or shareholders."

- AAP