Telstra still hung up on Canberra

IT IS 12 years since Telstra burst forth from its nationalised cocoon and almost four years since it severed the remaining ties to the federal government.

But Australias 10th biggest corporation, and the company that boasts more retail shareholders than any other, is now more than ever at the mercy of Canberra.

A few years ago, the telco dominated the sharemarket boards. Not any more. Under attack from competitors, bleeding revenue and dogged by uncertainty about its future, it continues to slip down the league table and, depending on the final calculations, is likely to be ejected from the top 10.

The brightest news to emerge this week was that the company did not sink to another record low as most analysts continued to shave their forecasts for the companys share price.

A few months ago, there was consternation when Telstra shares nudged below the crucial $3 mark. There are some pundits now wondering whether it will ever rise above that.

Telstra is under siege on several worrying fronts. But its most obvious pressure point is in the nations capital. And the single-biggest issue confronting the company is the future of broadband, and the role Telstra will play in any optical fibre cable rollout, if any.

A decade ago, Telstras investors were driven by greed as the dotcom boom gathered telcos to its bosom and raced into the stratosphere. Its future then was a never-ending tale of revenue and profit growth.

It thudded to earth in the early part of this decade before bouncing lower on the false hopes and misleading promises of the deeply flawed Sol Trujillo, until finally settling into its current spiral. For the past year, sentiment about Telstra has been driven by fear.

When Communications Minister Stephen Conroy last year unveiled his grand plan to break up Telstra and offer it the chance to strike a deal on installing a national broadband network, he was portrayed as a jackbooted socialist, riding roughshod over the interests of millions of small shareholders.

In the past few weeks, those same analysts who were screaming blue murder are now desperately concerned that the national broadband network may not proceed and that Telstra will be stuck with its century-old copper wire technology.

Opposition Leader Tony Abbott has deployed former Coalition leader Malcolm Turnbull, a man with more than a little experience in telecommunications technology, to demolish the NBN.

Thats politics for you. But if Turnbull is not careful, he may find himself being portrayed as filling Conroys metaphorical jackboots.

The fear and loathing campaign against Canberra was initiated by Telstras new management, now led by David Thodey. It was a clever and well-orchestrated ploy designed to pressure the Rudd government into offering over the odds for Telstras participation in the project. From Telstras point of view, it turned out to be hugely successful.

The company managed to extract $11 billion to hand over its customers and hardware to the government-owned NBN Co.

That figure may well be rubbery. The deal was struck when Kevin Rudd knew his leadership was on the line and he was desperate for a win. So there is every chance it is way beyond that, closer to $20 billion, given the payments stretch out over years and are likely to have been calculated on a net present value method.

But the problem with fear campaigns is that, once started, it is difficult to flick the switch to off. Disdain for politicians of all persuasions is so high that shareholders, sensing financial loss, are unlikely to differentiate between either party.

Business rarely is a zero-sum activity. For every winner, there is a loser. And if Telstra shareholders are winners from the deal struck between the company management and the Rudd government, then the Commonwealth or more accurately, taxpayers must be the loser.

But the waters in this normally crystal clear pond are muddied by the fact that a vast number of voting taxpayers own shares in Telstra.

Both sides of politics admit the privatisation of Telstra was botched; by both sides. Turning a publicly owned monopoly into a privately owned monopoly may have maximised the sale price, but now we are all paying. Under previous management, Telstra attempted to exploit its natural monopoly to thumb its nose at the legislation governing the company.

It stifled competition on the fixed line and deliberately undermined the Howard and Rudd governments on broadband policy, provoking the regulatory response now taking place.

Trujillo and his colleagues set a five-year plan in place for Telstra, knowing full well they would leave before the deadline so they could never be held accountable.

It was a plan that promised revenue growth, profit growth, cost containment and expansion into new areas. That deadline expires in mid-November and the only promise delivered on is that thousands of Telstra workers have lost their jobs.

The new management is lumbered with the legacy of the Trujillo years. But it is also faced with growing competition in mobile and wireless operators and encroachment by broadband players such as iiNet and TPG. That will hugely benefit customers at the expense of Telstra shareholders, who may also be left with a century-old copper wire network.

In Thursdays column, BHP Billitons Marius Kloppers was reported as arguing for an exemption to transport, agriculture and exports on his proposed carbon tax. This was incorrect. He advocated an exemption only for exports. It was my view that agriculture, which is a major exporter, would likely be exempted along with motorists and transport if a carbon tax was implemented.