Fowl play foiled, Telstra's fairy tale is over

Fowl play foiled, Telstra's fairy tale is over

Summary: Like many, I expected Telstra's dismissal was inevitable, given that it had openly flouted the NBN's guidelines and attempted to bend the process to its own wishes. But who would have expected it so soon?

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In space, they say, no one can hear you scream. I can only wonder whether the walls of Telstra's boardroom provided equal coverage for the noises that must have been emanating from it after yesterday's bombshell announcement that the telco had been kicked out of the running to build the National Broadband Network.

These very optimistic gentlemen still think the government will realise the error of its ways and come crawling back. Not very likely.

Like many, I expected Telstra's dismissal was inevitable, given that it had openly flouted the NBN's guidelines and attempted to bend the process to its own wishes. But who would have expected it so soon?

And, no less, on such an apparent technicality: the tender's expert panel didn't even end up having to consider the implications of Telstra's non-compliant NBN bid, which at just over a dozen pages apparently didn't offer enough space to include the required SME plans.

Telstra was quick to bag technicalities, but it had no problem relying on them in its relentless campaigns against the previous government's Opel bid. That it would then engage in such a high-stakes game of chicken, intentionally flouting the rules, seems, well, surprising. At any rate, it's the day after the announcement, and Telstra's board is probably in meltdown — or, denial, as seemed to be the case when at 9:12am journalists received an invitation to the hastily assembled 9:15am conference call with CEO Sol Trujillo, CFO John Stanhope, and group general counsel Will Irving.

Chairman Donald McGauchie was not present, presumably because he was busy either repeatedly beating his head against a wall or writing a long apology to the government (that's p-r-e-t-t-y-p-l-e-a-s-e, Don, and I hear Minister Conroy likes cherry-flavoured candy canes).

The presence of Telstra's head lawyer confirms the company is now in defensive mode, mindful no doubt of the potential shareholder backlash for its disastrous decision-making. It's also a signal that Telstra will explore every possible avenue of redress, which everyone now agrees is certain to include litigation against the mean, nasty, biased, cruel government.

This is the sort of thing that gets senior executives sued in other countries. Whether or not it escalates to the point where shareholders forcibly eject Trujillo and others, I cannot now say, but things are guaranteed to get interesting either way. Here are a few relevant excerpts from the conference:

  • Trujillo, asked about Telstra's regional strategy (which I discussed last week): "We already have deployed ... ADSL2+ to a very significant portion of Australia, so a build in the regions would have to offer something more and better to a relatively small percentage of the remaining [population]. The strategy of building into the cities from the regions, in our view, is a competitor tactic of trying to protect their DSLAM investments in the cities, and using government money to basically supplement the capital they would not risk for the capital from their own shareholders."

  • Stanhope, asked how much money Telstra had spent preparing its NBN bid over two years: "I haven't really added it up, to be honest; it has been fairly small. We do have a high technical capability ... and the engineering skills to put a good plan together, and we believe it's a very good plan. That work is not wasted, hopefully, because we think we're the only ones who can do [the NBN]."

  • Irving, asked whether the government could override the expert group's decision to eject Telstra: "This is a request for proposal process rather than a tender ... the government has the power under the process, if it wanted to have Telstra in the process, to keep Telstra in the process. Even if you take their view of the way they say the RFP has been worded, they could still have us there." (cf my allusion to Forgetting Sarah Marshall a fortnight ago)

  • Trujillo piped in at the end, repeating what seems to have become a hopeful mantra amongst the unrepentant executives: "The outcome here is not over," he said, "at least as we think about it in terms of the options that the minister and ultimately the Prime Minister and Cabinet have, in terms of how they choose to go forward. I'm sure the panel and staff have decided they want to explore in more detail whatever options they think are alternatives to Telstra, and they can do that."

These very optimistic gentlemen still think the government will realise the error of its ways and come crawling back. Not very likely: later in the day, even Conroy wasted no time putting the boot in: "Telstra's board will have to explain to its shareholders why it has decided to sideline itself from a process that will shape the Australian communications sector for the next decade," was one of the choice bits in his media release.

You get the feeling he had just been waiting to let loose on Telstra; now that the company is out of the NBN, he can do it.

The implications of this decision are, of course, tremendous and the game is far from over: observers seem to agree that Telstra's role in the NBN will go from unilateral agitator to ongoing pain in the backside for whoever wins the bid. What effect this has, well ...

(Credit: Hyperion Books for Children)

In the meantime, I am reminded of a scene from Artemis Fowl, Eoin Colfer's fantastic story of a 12-year-old who captures a fairy police officer and holds her for ransom — then finds himself confronting her without bodyguard Butler when his elaborate plan goes pear-shaped:

"At the risk of sounding clichéd, I've been expecting you."

Holly didn't respond, didn't even look her jailer in the eye.

"So, basically, our situation hasn't changed. You are still my hostage."

"Yeah, yeah, yeah," muttered Holly, running her fingers over the rows of confiscated [fairy] equipment...

Fowl interrupted again. "It's not polite, you know, ignoring your host."

Holly snarled. "Enough is enough."

She pulled back her fist, fingers curled in a tight bunch. Artemis didn't flinch. Why would he? Butler always intervened before punches landed. But then something caught his eye, a large figure running down the stairway on the first-floor monitor. It was Butler.

"That's right, rich boy," said Holly nastily. "You're on your own this time."

And before Artemis' eyes had time to widen, Holly put an extra few kilos of spring in her elbow and whacked her abductor right on the nose. "Oof," he said, collapsing on to his rear end ... "You hit me," he said in disbelief.

Holly strapped on a set of [wings]. "That's right, Fowl. And there's plenty more where that came from. So stay right where you are, if you know what's good for you."

For once in his life, Artemis realised that he didn't have a snappy answer. He opened his mouth, waiting for his brain to supply the customary pithy comeback. But nothing arrived...

"That's right ... playtime's over [said Holly]. Time for the professionals to take over. If you're a good boy I'll buy you a lolly when I come back."

And when Holly was long gone, Artemis said, "I don't like lollipops." It was a woefully inadequate response, and Artemis was instantly appalled with himself. No self-respecting criminal mastermind would be caught dead even using the word lollipops.

Topics: NBN, Broadband, Government AU, Telcos, Telstra

About

Australia’s first-world economy relies on first-rate IT and telecommunications innovation. David Braue, an award-winning IT journalist and former Macworld editor, covers its challenges, successes and lessons learned as it uses ICT to assert its leadership in the developing Asia-Pacific region – and strengthen its reputation on the world stage.

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Talkback

30 comments
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  • Why are we giving this so much air time?

    If this is the result we were all wanting - Telstra not building the NBN - then why is it getting so much time and space.

    The news is old - they are out - If they go to court - fine - a few more column inches - but lets get into the real contenders now - who are they - what do they have planned - what is the capacity to do it - what is their history of similar projects etc etc..

    come on you so called journalists - get with the program.

    Why arent we giving time and space to the remaining consortiums?
    anonymous
  • Because it's a major development in Australia

    I don't think this is the result we all wanted. What we wanted was way back when, for Telstra to allow competition and for the network to be built for the benefit of all Australians. I think what has given this story so much weight is that it's quite hilarious how Telstra have absolutely stuff up their reputation, they look like complete idiots.
    anonymous
  • agreed

    It's actually quite hilarious, after all there "we'll get it, you watch, we play it our way, were the only ones" then a simple, No, and bam there out of the biggest network build australias seen since we stuck in the original network, If i were a shareholder i would be pissed at this half-arsed gamble
    anonymous
  • Telstra and NBN

    This is a joke.
    I run everthing without a cable coming into the building. I can get real (tested) speeds -not claimed speeds of over 2,000 all for $39pm. I can get that in 98+% of Australia!
    Telstra will be at 21,000 in 2009 and higher by the end of the year and up to 100,000 in 5 years -all wireless.
    Why do taxpayers need to fund a $4.7b junkpile when Telstra offered to fund the deal?? Answer that please Minister Kingaroy.
    I am not a Telstra lover - I use 3 which I have found brilliant (2100 band), but keep my Telstra Wieless Modem (on a low plan -850 band) in my bag so I can connect anywhere.
    anonymous
  • Shock coming.

    The real story is this. Axia, Working Capital 19 million dollars. Total Market Capitalisation 101 million dollars. Number of employees 138. Fibre roll-out experience very little. This is the important story to be exposed.
    anonymous
  • For more information on Sydney

    If the comment above sounds suspiciously like a the Telstra PR machine kicking in, you may want to google Sydney Lawrence, the first result is from Telstra's nowwearetalking website - http://tinyurl.com/nbnspin; goggling 'Sydney Lawrence site:nowwearetalking.com.au' gives 434 results.

    I can't say whether Mr Lawrence is paid by - or receives in kind services from - Telstra; but his activity on the propaganda website is worth noting.
    anonymous
  • Actual bid

    At least they put in a real, valid bid - unlike your beloved telstra, which has billions of dollars and loads of experience. That is the whole point!
    anonymous
  • @actual bid

    so you dont need to be a legitimate company you just need a glitzy promo, i see, thank you.
    anonymous
  • @Shock coming.

    "The real story is this. Axia, Working Capital 19 million dollars. Total Market Capitalisation 101 million dollars. Number of employees 138. Fibre roll-out experience very little. This is the important story to be exposed."

    Yep, let's take a closer look at Axia.

    The Singapore NBN was won by the OpenNet consortium, of which a 30% stake is held by Axia, and another 30% by Optus's parent company SingTel. And then of course there is also the large fibre rollout Axia has already completed in Alberta.

    Sure Axia may not have a large employee base in Australia, but like the other bidders the bulk of the construction would be done by contractors anyway, no doubt with a lot of them staying on board to run the NBN once completed.

    So what is Axia bringing to the table, experience in large scale fibre rollouts, a history of selection by governments to rollout an NBN or be a part of an NBN rollout.

    Thanks for exposing them Sydney, I was worried for a moment they might get selected, we can't possibly let the NBN go to someone who might know what they're doing before they start.
    anonymous
  • Talk about news

    Peter Wilson, are you sure you are not Rex Alfie Lee, Lord Watchdog, Mel Somersberg or another one of the anti-Telstra cronies?

    The whole world knows that Sydney is an old self funded sharholder who has a true and undisputed passion for this company, what makes you think we all didn't know?
    anonymous
  • You mean FOUL?

    Because Telstra's attitude to their market presence being subject to some real competition stinks. Telstra is run by a bunch of self-centred self-aggrandising gronks who always break their backs for themselves and shareholders and give customers nothing.

    A lot of companies in other industries relish competition because whilst it means lower prices it also means more innovation and customer service. Telstra is like a little fat bad tempered six year old child - they want everything their own way.
    anonymous
  • The bottom line..

    The bottom line is....

    Telstra submitted a non-complete bid, foolishly, but it will cost them dearly and the shareholders have every right to be annoyed. With 8% of the company wiped of in a single day, it's no wonder it has received the coverage it has.

    Sol on a plate 08?
    anonymous
  • It was a significant gamble

    And they lost. The fact that the expert panel and Conroy have not been afraid to stare down Telstra is also significant. It would of course have been great to have Telstra contributing to the NBN in a positive way -- it certainly does have lots of very good people who could make positive contributions -- but its management's our-way-or-the-highway approach was just too far out of step with Conroy's determination to stay on message.

    The drop in share price is significant not just for the impact it will have on shareholders, but the implication that it will force a serious reconsideration of Telstra's overall strategy in 2009. Some will say the government has destroyed mum & pop shareholders' value, while others will say Telstra's share price has been artificially maintained and is now settling to levels more suggestive of the fully competitive environment it now seems Conroy is determined to deliver.

    Does anybody think this spells the end for Trujillo and/or McGauchie? It's not clear yet whether that would be good or bad, but it could certainly be a result of all this.
    anonymous
  • Dont count your chickens yet!!!

    You people really are idiots...let me quote Conroy!!

    ...Telstra is out of the "RFP Process"!! That does not mean he may have to cut a deal when he discovers the expert panel decide that none of the bids are any good!

    The fat lady has not sung...........................!!
    anonymous
  • Come on Sydney

    "The real story is this. Axia, Working Capital 19 million dollars. Total Market Capitalisation 101 million dollars. Number of employees 138. Fibre roll-out experience very little. This is the important story to be exposed."

    Fibre roll-out experience very little?? That's pretty much all they do! Come on Sydney you're normally a lot better than that
    anonymous
  • @ don't count your chickens

    You are half right in what you said - in the expert panel deciding none of the bids are good, they don't have to choose 1, they're there to select the best and if none of them are up to their standards, they don't have to choose any of them. BUT - that doesn't mean they're going to cut a deal with Telstra
    anonymous
  • Inaccurate reporting makes crap news

    "Peter Wilson, are you sure you are not Rex Alfie Lee, Lord Watchdog, Mel Somersberg or another one of the anti-Telstra cronies?"

    Better to be an anti-Telstra cronie than a Telstra fanboy. At least people respect those that are true to their word and fairdinkum.

    "The whole world knows that Sydney is an old self funded sharholder who has a true and undisputed passion for this company, what makes you think we all didn't know?"

    Sydney has actually denied being a shareholder a dozen times or more so you don't even have your facts straight.

    The only thing you got right in your rant that Sydney idolises Telstra.
    anonymous
  • Quote Conroy

    I wouldn't ever quote a politician in this way because they say one thing at first and then do the exact opposite the next.

    Just because you believe that the fat lady hasn't sung why do you think that Telstra's BID will be any better than their PROPOSAL?

    The fact is that anything Telstra submits will be strictly in favour of Telstra at all times, not giving any regard to how better off customers will be.

    Telstra's PROPOSAL stated that they only wanted to cover 90% of the population with the new network, leaving those in remote areas on their satellite network which is a costly way of getting a connection that could best be described as LATENCY PLUS.

    I will add that their budget plan of 1GB bandwidth and 200MB downloads barely ranks as an April Fools joke. This network is supposed to be FAST and whilst every single other ISP is happy to allow no restrictions as they do with ADSL2+, Telstra want to inhibit customers with their usual array of limitations and restrictions.

    Telstra isn't doing the right thing for Australia - they are just a pathetic bunch of out of touch misfits who want to cripple Australia by providing a continuation of their low-spec products whilst sodomising our wallets.
    anonymous
  • Damed if they did

    Telstra was in a no win position. Play to the NBN and loose vertical integration or walk away from the NBN and take a short hit from the market.

    There is no negative outcome in infrastructure based competition which, if the network is built by an entity other than Telstra, is what we will have. Telstra potentially looses its monopoly on the local loop - but that is largely illusionary anyway with ubnundling and various wireless access technologies.

    It will take some time to get a rival network up and running and Telstra cannot be expected to just sit around waiting for this event. I look forward to a broadband future with several institutions competing for my dollar.
    anonymous
  • everyone agrees... litigation

    What statement has been issued by Telstra that litigation is going to proceed?

    I would think Telstra persuing litigation would be laughable given their poor bid. However, analysts are 100% certain, so there must have been an official statement.
    anonymous