Next Telstra CEO must make peace

Next Telstra CEO must make peace

Summary: 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.

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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."

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

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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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26 comments
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  • Weak kneed freeloaders not wanted.

    Don't care who the new CEO of Telstra is as long as his name isn't Budde.
    anonymous
  • Syd I agree

    Syd i agree with you
    anonymous
  • ?

    Sainsbury?
    anonymous
  • Make peace, yes. Capitulate, no.

    Hopefully, Sol's replacement will give Telstra, the government, and the ACCC a reason to renew their relationship, but the "we'll give you the NBN if you let us destroy your company" deal will have to be as vigourously rejected as Sol did. The deal is no less toxic simply because Sol is gone.
    anonymous
  • God help Australia.

    Send Sainsbury to China please Mr Murdoch. Then I will buy the Australian again.
    anonymous
  • telsta make peace?

    why in heavens sake should telstr need to make peace? idependent economic anaylsis suggests that telsta stategy have placed them in a win win situation in regard to broadband fiasco.
    trujillo was never intimidated and its my veiw that telstra will continue to dominate the market which was always shonky due to continued govt. interferance which had no place or standing in free market.
    anonymous
  • Sainsbury

    Great article about the American freeloader by Michael Sainsbury. Absolutely spot on on all accounts. I
    anonymous
  • Sol should't shoulder all the criticism

    People seem to foget that Sol was chosen by the Telstra Board, and their chairman Donald McGauchie is just as much to blame for Telstra's arrogance as Sol.

    Sol is just the attack dog. Don's the one pulling the strings, or at the least implicitly agreeing with the strategy along with the Board.

    I don't see how changing the CEO is going to change Telstra, when the Board set the tone.
    anonymous
  • Why not Nationalise Telstra??

    Heres an idea!!

    Why not buy back the Telco from the shareholders...at a fair price.

    If the Dudd Governnment persists with policies like under Howard/Coonan we will never get out of this economoc mess!!

    Nationalising Telstra is best for the country!! Narrow minded people like Budde want tell ya this though!!
    anonymous
  • re Why not Nationalise Telstra??

    Sounds like a fair call to me, but it won't happen. The Dudd government wouldn't have the balls to admit any unfair interference, nor the expertise to run it properly..
    anonymous
  • Pot and kettle.

    Admit the fact that Mr Rudd has sent Australia broke. We cant afford beans let alone Telstra. His 60 billion dollar spend will not create one job. Also he castigates businessmen for their large salaries, how did his wife amass a fortune of 140 million dollars in a few short years?
    anonymous
  • @ Pot kettle

    How did she amass her fortune?

    By not investing in Telstra shares.
    anonymous
  • Sorry Sydney. Now to be serious.

    Now seriously.

    Come on Sydney while we all laugh at your stupid Telstraism, which you only have because of shareholdings, do you really believe that Rudd has sent Australia broke?

    You do understand that the entire world is in disarray and in comparison we are doing quite well. Even one of our most respected businessmen former Woolworths CEO Roger Corbett, who is now with the Reserve Bank, has said the Coalition should not stand in the way of the needed stimulus package, Rudd has announced.

    http://www.livenews.com.au/articles/2009/02/26/Business_heavyweight_slams_Liberals_opposition_to_stimulus_bill

    As for Rudd's wife. From Wiki. In 1988 she founded Therese Rein and Associates, later Ingeus. This international employment services agency assists jobseekers, in particular long-term unemployed people, enter the workforce.

    Along with many others, Ingeus has taken on the role after the Howard Government abolished Commonwealth Employment Service (CES), whose functions passed into the private sector

    Ironically, John Howard actually made PM Kevin Rudd's wife $140m richer. Even more ironically, some of this $140m would have undoubtedly, helped fund a Rudd win at the last election and the ousting of Howard.
    anonymous
  • re @ Pot kettle

    How do you know that she didn't invest in Telstra shares ?
    anonymous
  • Well....

    Maybe because she MADE lots of money rather than LOST lots of money.

    No wonder you guys have LOST so much, if you don't know by now?
    anonymous
  • Well done Mr Rudd.

    Brian your comments have good points for digestion but you miss my main point.

    The Telstra saga is only a demonstration of the dangers that face Australia, and a warning of what can be expected if our Government proceeds on its present course.

    Australians risk the loss of what little national assets we have left. My arguement is that the Rudd Government has plans to destroy Telstra, transfer the ownership of Australia's vital communication network to foreign ownership.

    Also, they ask the Australian taxpayer to fund this transfer of ownership with a $4.7 billion gift. Australia has given away most of its manufacturing capability (jobs) and remains at the mercy of foreign imports.

    With the sell-off of our mineral producing mines we will soon be workers, without influence, in our own land. Still, I suppose we have the advantage of a leader who speaks fluent mandarin who will easily transfer orders from our foreign masters to their Australian slaves.
    anonymous
  • Main point?

    Thanks Sydney.

    I do agree with you to a certain degree but this foreign ownership and $4.7bill is an entire new topic, which you only now mention, rather than your main point.

    My previous responses were made in reply to your comments Rudds $60bil package sending us broke and his wife amassing her fortune. I can't read minds and reply to something you did not previously mention, even if it was meant to be your main point.

    But to recap, you do raise some valid concerns.
    anonymous
  • re Main point?

    So once again the loon changes his name . Now he calls himself Brian Rodgers (roflmao)
    anonymous
  • Brian and Sydney

    Excuse my confusion, because I don’t know what the purpose of the reply was from anonymous and also his reply from, Your Hero?

    I am new I admit, so have I missed something? What was it you were trying to say to me? Do you guys here have some in jokes or something, because roflmao doesn’t mean anything to me either? Please explain.

    Join Sydney and my conversation, but please try to say your bit so that we can all understand.

    Again I’m not to sure if you are having a lend of me for some weird computer guy reason, or whether I should even bother again.

    Yours BR, now most confused.
    anonymous
  • Good to throw the switch to vaudeville sometimes.

    Brian your kind and intelligent reply to my earlier Post is accepted and its content noted. Referring to your comment concerning your confusion as to other correspondence, we do have entertaining, and intelligent, folk promoting various points of view on ZDN who display great comment and wit in a manner which, at times, may not be immediately obvious.
    anonymous