There is still no word from Telstra Corp Ltd (ASX: TLS, OTC: TTRAF, ADR: TLSYY) about what it will do with the billions of dollars it will receive from Australia’s National Broadband Network (NBN) in exchange for its copper-wire infrastructure and the customers who use it.

But Australia’s dominant telecom continues to position itself to derive maximum benefit from the estimated AUD11 billion once it does start to flow.

Telstra won a passive victory this week when the Australian Competition and Consumer Commission (ACCC) approved the AUD1.9 billion acquisition by Foxtel Cable Television Ltd of fellow pay TV operator Austar United Communications Ltd (ASX: AUN). Telstra owns 50 percent of Foxtel; Consolidated Media Holdings Ltd (ASX: CMJ, OTC: CMJFF) and News Corp (NSDQ: NWSA) each owns 25 percent.

The combined entity will have more than 2.3 million subscribers.

Telstra received AUD70 million in distributions based on its stake in Foxtel, and this figure should grow as the company exploits opportunities to market its own digital content offerings to Austar subscribers. Foxtel has agreed to give up the right to broadcast exclusively over the Internet a number of TV shows and movies from over half of the eight major film studios. But it still gets domestic sporting events all to itself, long considered to be the jewel in its crown.

Foxtel-Austar also serves as a critical foothold as Telstra establishes access to content to distribute over its increasingly robust network; the deal will allow Telstra to extend the Foxtel content it distributes via its T-Box Internet Protocol Television, or IPTV, offering into areas where Austar operates.

Pay TV operators, including Foxtel, continue to add customers but are under more and more pressure from alternative distribution methods.

IPTV, for example, poses a threat to the traditional fixed-wire cable model, as will the NBN once it gets up and running. Sports leagues, including the Australian Football League, will be able to control their own content and distribute through their own “networks” directly to consumers over the NBN. The Foxtel-Austar union removes one of the potential long-term regional challengers to Telstra on the IPTV front as well.

In this deal is combined all the forces that inspire fear among its competition and leave Telstra the unquestioned champion of the Australian telecommunications market: the prospect of accessing Austar’s regional customer base, luring new subscribers with offers of bundled broadband, telephony and IPTV services, including the storage and applications capability for businesses and consumers that we like to call “the cloud,” and keeping them with incomparable ability to invest in and expand its network.

The NBN deal will result in about AUD11 billion in post-tax, net present value payments over the term of the agreements. One of the definitive agreements revealed includes a provision for a payment of about AUD300 million this year. Cash due in 2012 according to terms of the Campaign and Migration Deed wasn’t included in previous company guidance.

Management has widely hinted at some sort of “capital management” in the near future, based on finalization of its Structural Separation Undertaking (SSU) and ratification of the NBN deal. Speculation about a special dividend, a dividend increase and/or a share buyback, or perhaps some combination thereof, has pushed and pulled the stock for months.

Issues surrounding the complex rollout of the NBN, including the handover of Telstra infrastructure for use by its competitors, continue to hold up public definition of these plans, if, in fact, management decides to do anything right now.

For instance, last week the ACCC called for public submissions on Telstra’s request to delay the date it provides competitors access to parts of its fixed-line network. Telstra has asked the watchdog to vary the final access determinations (FAD) of its declared wholesale line rental, local carriage and preselect and override services.

Under the NBN agreement Telstra is required to provide access for competitors to these services but technical limitations prevent it from doing so in newly developed estates. According to the ACCC, “Telstra has requested relief until March 2013 from providing this access, where the services are typically supplied in newly developed estates (greenfields) using the National Broadband Network.

But there is no existing copper telecommunications infrastructure in a greenfields estate. Telstra has said it will take until at least September before it has the technical ability to provide the access, at which time it will make its wholesale and retail services available to competitors. The 12 months is to provide a safe harbor for any unforeseen events or circumstances. The ACCC is accepting submissions until May 11, 2012.

Following the acceptance of Telstra’s SSU Fitch Ratings revised Telstra’s credit outlook to “stable” from “negative” and affirmed the company’s Long-Term Issuer Default Rating (IDR) and senior unsecured rating at “A.”

Telstra also raised EUR1 billion (AUD1.23 billion) via a 10-year bond with a 3.5 percent coupon rate. The offering, which matures Sept. 22, 2012, was priced 161 basis points above comparable German government bonds and 115 basis points above the mid-rate swap.

The company also announced the appointment of Beijing-based businessman Tim Chen, known for practicing “basketball diplomacy” in China while chief executive of the National Basketball Association’s venture in the Middle Kingdom.

Mr. Chen will likely be pressed into service immediately, as China-based telecom Huawei Technologies Co will not be allowed to contribute to the NBN on security grounds. Beijing has registered its objections.

Before he headed NBA China, Mr. Chen held senior executive positions with Microsoft Corp (NSDQ: MSFT), where he was regional CEO and corporate vice-president, as well as with the old Motorola and the old AT&T Bell Laboratories. He’s credited with rebuilding Microsoft’s relationship with the Chinese government. It’s a subtle move–Mr. Chen and Telstra CEO David Thodey, who ran Basketball Australia while the newcomer was working with the NBA, are both hoops-heads–but there’s long-term ground to be won here, too.

The biggest, not-so-subtle issue remains the AUD11 billion windfall coming from the NBN.

Setting aside a dividend increase, a special payout and a share buyback, we remain impressed by what this additional cash flow will do to fortify Telstra’s leading position in technology and infrastructure improvement.

Although management hasn’t ruled anything out as it weighs ideas how to spend its bounty, an increase in the regular dividend seems unlikely. Even a one-time payout or a share buyback doesn’t really square with management’s stated priority of winning market share based on its leading technology and infrastructure position.

And, remember, Telstra isn’t going to get one of those gigantic lottery checks that it can deposit immediately to its account. It will receive infrastructure leasing payments beginning next year that should approach about AUD200 million. It will get paid “decommissioning” fees as its customers disconnect from its service and join the NBN, which could roughly double the annual payout.

But the AUD11 billion could come over decades, certainly not days, or even months or years.

What it does is strengthen Telstra’s already well-established leadership position in wireless connectivity and the provision of increasingly important data services. What separates Telstra from the Australian pack and puts it on the plane with US-based giants such as AT&T (NYSE: T) and Verizon Communications (NYSE: VZ) is its ability to invest in its network, add contract wireless customers and sustain a healthy dividend.

Telstra’s immense relative advantage Down Under will drive continuing contract wireless subscriber growth and keep revenue growing. Its deteriorating print directory business, Sensis, will continue to be a drag on top-line growth (revenue from the unit declined 39 percent half-over-half) over the medium term.

It spent AUD1.7 billion on its network in the first half of fiscal 2012, which is actually part of a tapering down from the AUD5.9 billion Telstra spent in fiscal 2007, which declined to AUD4.9 billion in fiscal 2008, AUD4.6 billion in fiscal 2009 and AUD3.5 billion in 2010. The bulk of major spending is done, though maintenance will help preserve its dominant position.

The company’s focus now is on distinguishing itself with superior customer service, which will continue to require major investment. Management continues to point to a target figure of about 14 percent of sales for CAPEX guidance.

The bottom line is Telstra’s priority right now remains balance-sheet flexibility. There’s about AUD3 billion in cash on the books right now, and that figure will look even better once the precise terms of Telstra’s receipt of its compensation will be known.

Everything else–including some of Telstra stock’s impressive run during the summer (Southern Hemisphere)/winter (Northern Hemisphere) of 2011-12 and what management will do with its new bounty–is speculation.

We like Telstra because of its dominant position, its attention to weak spots such as customer service and proven ability to fix same, and the prudence management has shown in focusing on preserving that which makes it a compelling long-term wealth-building story: its scale advantage.

A robust network will keep Telstra’s wireless subscriber rolls growing and its data revenue share expanding. But make sure you don’t overpay at a time when many investors may be over-enthralled by thoughts of AUD11 billion.

Telstra, one of the eight original members of the Australian Edge Model Portfolio, has had a nice run since we launched the service in September 2011, though its 21.4 percent total return in US dollar terms through Apr. 10 pales just a bit in comparison to the 26.1 percent return generated by all eight of the original members of the AE Portfolio since inception.

The S&P/Australian Securities Exchange 200 Index has produced a total return of 20.2 percent from Sept. 26, 2011, through Apr. 10, 2012, while the S&P 500 is 18.3 percent to the positive.

Australian stocks have benefitted from modest strengthening in the Australian dollar, which was good for USD0.9833 on Sept. 26, 2011, ran as high as USD1.0809 as of Mar. 1 and is trading around USD1.0315 as of this writing.

Over the past half-decade Telstra has posted a total return in US dollar terms of 35.8 percent, well ahead of the S&P/ASX 200 Index at 15.5 percent and the S&P 500 at 10.5 percent. The outperformance is a function of a stronger aussie against the buck as well as Telstra’s solid dividend.

The pieces are in place for Telstra to grow for the long term, though management’s priority right now in a competitive environment is to out-invest challengers. In the meantime the stock pays about AUD1.40 per share per year, good for a yield of 8.4 percent.

The company declared an interim dividend on Feb. 8, 2012, payable Mar. 23, 2012, to shareholders of record Feb. 24. It will declare a final dividend for fiscal 2012 on Aug. 8, 2012, when it reports results for the 12 months to Jun. 30, 2012. Management typically hosts a “business update call” in mid-June.

Telstra Corp, Australia’s dominant telecom, remains a buy under USD3.20 on the Australian Securities Exchange (ASX). It’s also a buy under USD3.20 on the US over-the-counter (OTC) market using the symbol TTRAF.

Telstra sponsors an American Depositary Receipt (ADR) that trades on the US OTC market under the symbol TLSYY. Telstra’s ADR is worth five ordinary shares that trade on the ASX. Buy Telstra using the OTC symbol TLSYY under USD16.