Telstra gives Turnbull and TPG a run for their money

Telstra chief executive David Thodey has used the sidelines at the Mobile World Congress in Barcelona to send some carefully constructed messages back home.

The good news for Telstra shareholders is that their adroit chief executive is keeping a close eye on the future while ensuring that the value of its legacy assets are protected.

With the negotiations with NBN Co under way, Telstra finds itself in an unenviable position but the billions waiting in the pipeline don’t necessarily guarantee the telco’s aspirations to be a major player in the global telecom market.

Following Qantas’ lead

Taking a page out of Qantas’ book, Thodey has resurrected talk of lifting the foreign ownership cap on Telstra, telling The Australian that the legislated restriction of foreigners holding more than 35 per cent of Telstra shares, and individual investors unable to control more than 5 per cent, is a "constraint" on the telco's ability to do business overseas.

Thodey makes a valid point, especially when you take a look at what’s happening in the global telecom space. The big players in the space are gearing up for consolidation and forging partnerships to become more than just mere purveyors of dumb pipes.  

Lifting the restrictions would certainly help Telstra forge bigger alliances but David Thodey is undoubtedly under no illusion that this can of worms is going to be opened anytime soon.  

That doesn’t mean it’s not going to come back into the picture. If and when the National Broadband Network is in place, Telstra will inevitably raise the issue.

If Telstra does exit the ownership of fixed-line access infrastructure in Australia, Thodey’s appeal will take on a lot more legitimacy.

Independent telco analyst Chris Coughlan says that Thodey might have taken the opportunity to piggy-back off the Qantas situation but it’s not a like-for-like comparison.

However, Coughlan adds that the issue will merit more consideration in a post-NBN world.

“If Telstra doesn’t own the fixed-line access infrastructure anymore then how does it differentiate itself?” Coughlan says.

“They will have a dominant mobile network and considerable transit infrastructure but nothing that another carrier couldn’t duplicate."

Fibre-to-the-Basement clarity    

Speaking of the NBN, this where things get interesting. David Thodey’s confirmation of Telstra testing Fibre-to-the-Basement (FTTB) networks -- which could compete against the NBN -- adds another dimension to the regulatory headache facing Communications Minister Malcolm Turnbull.

TPG Telecom’s FTTB ambitions, predicated by a regulatory loophole, were never appreciated by Telstra and Thodey’s comments to the Australian Financial Review highlight that the final outcome on whether or not TPG is allowed to fulfil its plan could potentially spill into a bigger complication for the government and NBN Co.

Again, Telstra offering its own FTTB network isn’t bad news for those espousing the cause of greater infrastructure competition but it will be a blow to NBN Co’s bottom line, something that Thodey acknowledges in his comments to the AFR.

The message for the government is clear. Unless TPG’s FTTB dream is nipped in the bud things are going to get decidedly unpleasant.

Minister Turnbull is betting that the cost-benefit analysis will deliver the guidance he needs but Telstra has made its position crystal clear.