Next Telstra CEO must make peace

Telecommunications analyst Paul Budde (Credit: BuddeComm)

Like it or not, Telstra CEO Sol Trujillo's successor will need to make conciliatory gestures towards the government and reconsider the company's strategy to remain relevant, analysts have concluded in the wake of this morning's announcement that Trujillo will depart the company on June 30.

"The whole world is turning against the sort of attitude that Trujillo put on display," said Paul Budde, head of telecommunications analysis firm BuddeComm, referring to the fierce campaign Trujillo spearheaded against government regulation during his tenure.

The whole world is turning against the sort of attitude that Trujillo put on display

Telecommunications analyst Paul Budde

That campaign hit a low point in Telstra's ejection from the government's $4.7 billion National Broadband Network tender in December, after the company was found to have submitted an incomplete bid.

The decision meant the writing was on the wall for Trujillo, according to Budde, who believes it has put Telstra on the back foot and will stand as an ignominious conclusion to a tenure defined mostly by the company's many conflicts with government policy.

Trujillo "has done some good things, but his legacy will be that he was the one who took on the government and lost," Budde said today. "Telstra's share price reflects that the share market didn't believe that fighting the government was a good idea. The financial markets aren't just looking at profits now."

Telstra's share price was slightly down by mid-day, fuelled by the news of Trujillo's departure as well as a reported 1 per cent fall in first-half profit to $1.92 billion.

Even as observers weigh up the tone of Trujillo's legacy, speculation about Trujillo's successor is gathering speed as observers debate who is best suited to step into his shoes. In the statement announcing Trujillo's departure, Telstra said the board "is well prepared with succession planning and will now formally commence a wide-ranging search for a suitable successor."

Trujillo's replacement is expected to be named before his departure on June 30. Telstra could well look externally within Australia or overseas, as it did with Trujillo, to bring in fresh blood and build on the infrastructure legacy he leaves behind, said David Cannon, telecommunications program manager with IDC Australia.

Now that they've been kicked out of the NBN process, one of the only face-saving ways to get back into the dialogue is to literally have a different set of people talking.

Market Clarity's Shara Evans

With Telstra's Next G wireless broadband network being boosted to 21Mbps and its consolidation and transition to an all-IP core well underway, Cannon said the new CEO will need to not only manage Telstra's role in the NBN but will need to guide the company to exploit its infrastructure to offer relevant — and profitable — new applications and services.

"It was a surprise that we got Sol in the first place," Cannon said, "but there are a lot of global CEOs that would like to be associated with a company that's leading-edge, technology-wise, and has a strong balance sheet.

Telstra going forward is going to be heavily media-orientated, and there is a major need for someone who is both media- and telco-focused, and has a proven ability to lead Telstra through its changing business model."

Market Clarity chief executive Shara Evans, however, isn't so sure Telstra needs new blood right now: while "anything is possible", she said today, "I would hope they'd be looking internally or at least within Australia. [Recently departed COO] Greg Winn mentioned they were looking internally, and that Telstra has strong succession planning in place."

Telstra capitulation?
The appointment of a new CEO would pave the way for a broad shakeup of senior executive roles, something Evans indicated might benefit Telstra's relationship with the government in the long term.

"It would be a face-saving gesture on all parts, since the government and Telstra have been at a standoff," she explained. "Now that they've been kicked out of the NBN process, one of the only face-saving ways to get back into the dialogue is to literally have a different set of people talking."

She offered one caveat, however: "If the board remains the same, I'm just not sure how different the new CEO may be. No matter what happens, I think Telstra will still be reluctant to open up its infrastructure to the extent that the government would like."

Budde, however, is confident that such opening-up is inevitable: "it is going to happen one way or another — and it's much better [for Trujillo's successor] to say 'let's participate in the discussion of what's needed'. We are seeing the end of an era for Telstra, and we'll start seeing that telecommunications as an infrastructure will have to be treated as being for the common good."

Citing the experience of ex-monopolist telcos in New Zealand, the Netherlands and elsewhere, he said Telstra has no choice but to take a more proactive stance towards the government: "Telstra lost a very, very valuable position at the table, and it is at a clear disadvantage without it," he explained. "It will have to win that position back."

And the person to do that? Budde doubts the new CEO will come from inside the company because Trujillo's replacement "will have to be a far more diplomatic, more charismatic person who is willing to sit down with the government — and not the level of arrogance that Trujillo has displayed."

"Internal people are all tainted by the Sol brush, and none of them have stood up and indicated they want a change of direction," he explained. "It's difficult to reconcile that with the need for a fresh start."