THE DISTILLERY: Telstra calling

Scribes consider the NBN under a Coalition government, with one noting Telstra could become reliant on more handouts.

This morning Australia’s business commentators flip through Telstra’s latest set of numbers with an eye for ‘NBN Co: Coalition Edition,’ concluding that it won’t be a big deal for Telstra. Additionally, Thodey’s promise of improved customer service and the dividend outlook get a once-over.

But first, The Australian’s John Durie writes that the number one issue for Telstra in 2013 is the election, or more precisely, what Turnbull will do if he gets Stephen Conroy’s job.

"This year Telstra will earn up to $400 million from the NBN deal in rental and other income, but when it starts cutting off copper-line customers the taxpayer subsidy funds will run into a multiple of that. You could argue Telstra will need every bit when you consider over the past five years fixed-line revenues have fallen by 35 per cent, or $1.2 billion, and the pace of fixed-line customer losses is picking up. The obvious danger then is that if fixed-line customers fall faster and the NBN is halted, then Telstra may have a problem. This danger is not huge when you consider Turnbull has promised not to disadvantage the company and any changes to the present agreement simply mean more government handouts to the phone giant.”

Business Spectator’s Stephen Bartholomeusz acknowledges that freezing the rollout of the NBN while Turnbull commences negotiations would stop the flow of cash to the telco, however…

"…Telstra would continue to generate cash and margin from the copper network. Thodey has referred to that fallback position in the past as a natural hedge within its NBN arrangements. The result also reinforces how critical the decision to shift strategy in mobiles some time ago has turned out to be, with Thodey adding price-competitiveness to Telstra’s network quality advantage and turbo-charging the growth in customer acquisitions. It was fortuitous that Vodafone’s network disintegrated at about that time and that Optus has been more focused on protecting its margins than engaging in a price war.”

Fairfax’s Malcolm Maiden takes us through the business thinking behind customer satisfaction surveying in relation to the telecommunications industry, specifically Telstra.

Thodey wants to get Telstra up to world’s best practice. Maiden writes that Telstra hasn’t revealed its hand yet, but Thodey is said to be utterly relentless on the topic.

"The industry benchmark is Verizon of the US, and its NPS scores begin about 25 percentage points higher than Telstra. So if Telstra surveys 10 million a people a year as the December-half survey pace suggests, it needs to shift about 1.25 million of them over from the detractors basket to the advocates basket to get into Verizon's class. That's a big task, but it isn't just an academic exercise. Customer satisfaction feeds back into revenue and earnings because advocates are customers who are extremely happy. They are the least likely to move to a competitor, and also the most likely to react positively to invitations to deepen their relationship, by taking on (and paying for) more services.”

The Australian Financial Review’s Chanticleer columnist Tony Boyd notices that Telstra hasn’t given any guidance for its dividend beyond this year, but it’s not a stretch to think that the 28 cents will be maintained.

"The board is very conscious of the role Telstra that plays in the portfolios of Australian investors and superannuation beneficiaries. In fact, the company estimates that when you include all the superannuation funds holding Telstra shares, at least 4 million households have a stake in the company’s performance.

Meanwhile, Fairfax’s Adele Ferguson says mining billionaire Gina Rinehart and her like-minded members of Northern Development and Economic Vision advocate a lot of the things discussed in Opposition Leader Tony Abbott’s discussion paper.

Through ANDEV, Rinehart has shown her support for things like a an economic development zone up north and a reduction in green and red tape.

"It is all big picture stuff which would cost hundreds of billions of dollars to implement and even more to build. To some it is visionary, to others it would represent a further divide between the rich and poor. Abbott is careful to say it is only a discussion paper and the next step is an options paper and then policy. He forgot to mention all the internal polling that will be done to see whether or not it flies. It certainly will fly with Rinehart and her coterie of friends who will be more than happy to provide them with the blueprint.”

In company news, The Australian’s Richard Gluyas heralds the long awaited breaking of National Australia Bank’s seven consecutive quarters of $1.4 billion profits – that is, if you round $1.45 billion up to $1.5 billion – but also celebrates the lack of any real bad news out of the lenders troubled UK business.

In a similar spirit, The Australian Financial Review’s Andrew Cornell writes that not having any more problems to fess up to is a big win for NAB boss Cameron Clyne. While many hoped that Clyne would finally return NAB to a mantle greater than ‘just the fourth placed Aussie bank’ – and there’s a strong case to be made that he’s well on the way to doing that – avoiding big problems is not mean feat for a lender that have proved to be consistently unwieldy.

The Australian Financial Review’s mining reporter Jamie Freed says the environmental regulatory delays to the Maules Creek coal project are now becoming material for Whitehaven Coal. The Australian Financial Review’s Matthew Stevens digs a little deeper for the descriptions of the three species that are particularly threatened by the development.

The Australian’s Bryan Frith writes that the consumer watchdog appears to be more open to the ‘failing force’ argument in takeovers.

The argument goes that one competitor takes over another that’s on the decline. If the ACCC blocks it, the target could fold, lessening competition more than if it had approved the deal.

Elsewhere, Fairfax’s Michael Pascoe explains how Australia’s rising population will keep inflation "tame” over the next few years, even as the impact of Australia’s high dollar softens.

And finally, The Australian’s Glenda Korporaal notices that one of the issues brought up by the current debate about superannuation is the inequity between people on defined contributions schemes and those lucky ones on defined benefit schemes.

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