Telstra split-up: Complete industry response

Telstra split-up: Complete industry response

Summary: The telecommunications industry seems to be wreathed in euphoric mist after today's announcement which looks to lead to Telstra's separation, but there are still voices of caution to be heard.

TOPICS: Telcos, Telstra

update The telecommunications industry seems to be wreathed in euphoric mist after today's announcement which looks to lead to Telstra's separation, but there are still voices of caution to be heard.

What Telstra does in a sense is kind of irrelevant to us. Whichever way, the days of Telstra's vertical market power are over.

CCC executive director David Forman

The Federal Government announced today that if Telstra did not voluntarily structurally separate, a new telecommunications reform package would permit the government to impose an oppressive functional separation framework on it. Telstra said it was disappointed but willing to cooperate.

Matt Healy, national executive, regulatory and government for Macquarie Telecom described the atmosphere at the press conference as "buoyant". Optus regulatory affairs general manager Andrew Sheridan from Optus agreed to a joke that he along with the rest of the carrier's staff were dancing on roofs.

Yet it was Communications Minister Stephen Conroy who was the cat getting the cream. "It was clearly a buoyant and optimistic minister," Competitive Carriers' Coalition executive director David Forman said. "A minister who was of the conviction that what he was announcing was historic."

"This is game changing legislation. It's a stronger version if anything of the UK arrangements," Forman said. It struck to the heart of the problem, he believed: that the Australian Competition and Consumer Commission couldn't bring access disputes to a conclusion.

"The focus has to be on consumer interest and competition," iiNet's chief regulatory officer Dalby said. "That looks to me to be the likely outcome of these reforms."

Applause also came from across the Tasman. "Operational separation has already delivered demonstrable benefits in New Zealand including significantly increased investment and more competitive choice for customers," Telecom NZ CEO Dr Paul Reynolds said in a statement.

Reynolds did, however, admit that his pleasure with the decision was not entirely altruistic. "For some time we have been seeking a level playing field where our Australian business, AAPT, enjoys the same equal access to customers in Australia as Telstra already receives in New Zealand," he said.

The industry felt it had Telstra where it wanted it. "It can choose to structurally separate and be part of the future or stay in the path and be subject to regulation," Healy said, backed up by a statement from AAPT CEO Paul Broad.

"What Telstra does in a sense is kind of irrelevant to us," Forman said. "Whichever way, the days of Telstra's vertical market power are over."

It's not a done deal yet, though. The legislation needs to go through parliament. "I'm expecting that there'll be a fair bit of discussion," Dalby said.

Ed Husic
(Credit: CEPU)

Discussion was something there has not been enough of up to this point despite the call for submissions on legislative reform, according to Ed Husic, national president of the union representing the most Telstra employees, the Communications, Electrical and Plumbing Union.

"We are concerned about the amount of consultation the government has made before making this announcement," he said. "It hasn't been widespread."

Husic said he was concerned about the thousands of people who work for Telstra. He said it's been hard to gain knowledge by examining other countries as Australia's market model and geography are different to the UK and New Zealand whose telecommunications incumbents have also undergone separation.

The risk with separation was that revenue streams would "go all over the place", he said, which could have unpleasant effects. "It doesn't take too much convincing for Telstra to cut jobs. It would certainly accelerate decisions on what they want to do about jobs and conditions," he said.

Husic wasn't convinced either that the government has been getting entirely impartial advice from industry on the separation issue.

"A lot of the interested parties who have been calling for separation are doing so with a vested viewpoint," he said. "That's not the way to make policy"

The policy needed to be based on whether or not Australia would see a benefit, either by getting faster broadband or cheaper prices, and not the interests of powerful stakeholders. It also needed to take jobs and conditions of Telstra employees into account, Husic said.

"We would expect government to be a lot more open in discussions," he said. "Stakeholders who make the largest noise shouldn't be the ones making the policy."

Internode managing director Simon Hackett believed the reforms couldn't come quickly enough. "It looks to be very close to what the industry has wished for, and it will, we hope, address the long standing deep inequities in the current regulatory regime that allow Telstra to 'game' that regime (and to date, they have 'gamed' it and usually won — with consumers having been the losers)," he said.

Hackett thought the announcement didn't leave Telstra with many options, with only its past behaviour to blame for that fact. "There is not much wiggle room in the announcements for Telstra. At a deep level, the current management team must now face the challenge of reaping the outcomes sown by the previous Telstra management team."

As for Telstra's shareholders, Hackett was convinced that separation would be beneficial to them since it would force the "halves" of the business to be as effective as they could be.

"Today the share price of Telstra reflects the average of a long run utility business added to a vertical value-added services business," he said. "Separating them allows the value of the value-added services business to increase, and allows the utility business to concentrate on doing a great job of being that utility business."

Topics: Telcos, Telstra

Suzanne Tindal

About Suzanne Tindal

Suzanne Tindal cut her teeth at as the site's telecommunications reporter, a role that saw her break some of the biggest stories associated with the National Broadband Network process. She then turned her attention to all matters in government and corporate ICT circles. Now she's taking on the whole gamut as news editor for the site.

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  • It's a joke.

    Can anyone explain how the break-up of Telstra and the spending of 43 billion on the NBN will make services cheaper for the Australian consumer?

    This Rudd plan is obviously to cut Telstra competition to the Government NBN and to placate Telstra opponents who are demanding bigger profits.
  • Not a joke, it's a sad day for Australia

    In its 25 page, Shareholder Update 2009 - MAKING A DIFFERENCE, on the 11 September 2009 David Thodey Chief Executive Officer outlined a beautiful set of numbers:

    * $31m provided to more than 5,850 community projects across Australia through the Telstra Foundation since 2002

    * 8bn calls handled on our fixed line network

    * 30,000 employees in Australia

    * $25bn of sales revenue generated

    * 10m mobile customers including 1 million wireless broadband customers

    * 3.5bn of dividends paid to our shareholders

    This is a tangible stimulus to the Australian economy. What have Rudd and Conroy contributed?, apart from disrupting the New Telstra board's Agenda VIZ:

    "Now is the time to drive the benefits of the past four years of hard work rebuilding Telstra and making a difference for our customers, employees and for our shareholders."

    In his response to the unwarranted threat, David Thodey calmly reiterated some words of wisdom "While we are disappointed the Government has felt it necessary to introduce this legislation, Telstra remains committed to working with the Government to find a solution that is in the best interests of the industry, the nation, Telstra and our shareholders,"

    Let the people speak.
  • What has Telstra contributed?

    55,000 employees sacked, contracts for IT solutions and call centres shifted offshore, prices that do not reflect the quality of services provides (read: pricing that is far too high), hiring of two foreign CEOs since corporatisation, installing multiplexing devices on the fixed line network (in line with best practice of course!) that restrict and/or prohibit ADSL connections, restricting cable networks to the capital cities.....

    Would you like me to continue?

    The bottom line is that Telstra sucks as much as Labor do.
  • A great day for Australia but not shareholders

    Telstra is a truly shocking company to deal with as a customer, supplier, employee.

    It deserves every bit of misfortune that comes its way.

    After 4 years of abusing successive governments, it finally gets some of its own medicine.

    Shareholders and Sydney should be on a plane to go and confront Phil Burgess for his disgusting tirades against the government over the 3 years he was in this country.

    Successful business is based on building solid relationships, not abusing those around you.

    Telstra has stifled innovation in the Australia telco market for so many years for their own financial benefit (and contrary to the benefit of Australia) that now the time has come to legislate against them.

    Seeing Telstra being paid back is a truly satisfying experience. I hope as a result that it learns some humility
  • Silver lining for Telstra.

    Let us all be honest here. The Rudd Government blackmail of Telstra is to force Telstra to support the Rudd Governments promise of a FTTP National broadband Network.

    Without Telstra facilities and customers the Rudd promise of the fibre network will be a failure. The Rudd vindictiveness is undoubted and Telstra should agree to full structural separation.

    Of course, the Government must bear some of the cost of this transformation by granting Telstra a large percentage ownership of the proposed NBN and guarantee of fair regulation for the separated Telstra.

    The advantages for Australia of a large successful Telstra in some cases will be lost as Telstra will no longer be in a position to sponsor major sport. This would be serious and sad, maybe Mr Rudd can take Telstra's funding place.

    The good thing of the structural separation is that the overhang of disingenuous and destructive regulation on Telstra will be removed and Telstra will be allowed to compete in fair and open conditions.
  • Silver lining for the consumer

    "Telstra will no longer be in a position to sponsor major sport".

    Sydney - this is a joke of a comment. I'd rather have cheaper broadband than Telstra sponsoring sport.

    You speak as though the Australian economy is so small that there is only one seriously sized company able to engage in sports sponsorship.

    If Telstra can't sponsor sport, I am sure someone else will.

    The separation of Telstra is long overdue and is great news for the Australian consumer.

    Not owning Telstra shares (or any other telco shares), I quite frankly don't give a stuff if shareholders are upset.

    It's about the consumer mate.
  • Cheaper NBN, hardly.

    Anon I am sure your dismissive comment of sports sponsorship will not be shared by those being sponsored.

    How do you conclude that you will receive cheaper services with the dismantlement of Telstra?

    I would have thought that with an investment of up to $43 billion the NBN would need serious charges.
  • Telstra

    what does 'wreathed in euphoric mist' mean? I didn't realise mist experienced emotions.
  • Sell it then Cripple it.

    What a smack in the face to the 1.44 Australians who bought this company from the govt. The Lefties are in the driving seat now boys, look out Big Four banks, the ones,that by prudent management, minimised the effects of financial meltdown here. Banks are certain to have new Tier 1 regs following G20 .. and Rudd's posing as the minnow leading the whale.
    While current telecom infrastructure sharing may be less than perfect, remember that this is a huge continent with low density of population overall, the massive existing infrastructure has been paid for by many who bought into Telstra as secure dividend paying company to partly fund their retirement. A fair cop please. Is the govt next going to turn around and insist BHP fall cut itself in half? Hello taxpayers, after the massive costs are been paid for the NBN (~$45 Billion plus interest on that for years - hey the stimulus package was $30 bill, and look at its impact on govt debt situation) do you think your slightly cheaper broadband will be worth it? Yesterday was a RED day for all the wrong reasons
  • 55,000 employees sacked?

    Mel where in the hell did you get that number from. Considering Telstra has approx 35,000 current employees I do not think Telstra ever had 90,000 employees.
  • Suck sh*t telstra!


    You reap what you sow and Telstra has caused much grief in the past ten years.
  • Lefties?

    You gotta be kidding, there hasn't been a leftwing govt in this country since 1975. The banks are a bit different from telecoms - if there was a single bank that controlled all capital you'd have a similar problem.

    You are also assuming that this will be bad for shareholders. My guess is that within 12 months, they will be ahead of the game.

    After 15 years of stupidity, the Australian telecoms industry is now back on track. Finally there will be market certainty and the chance of innovation.
  • heh heh

    I believe that is a journalist trying to be a bit creative and falling flat!
  • 55,000 employees sacked?

    In actual fact, Ed Husic, national president of the union representing the most Telstra employees is right to be concerned NOW about the fate of some of Telstra's 30 thousand employees.

    NBN Co will be, in the main, administrative with lots of chiefs, few indians and an array of contractors.
  • Telstra splitup

    About time. As an ex employee of Telstra and a long suffering customer I find that Telstra has nothing but contempt for both it's customers and employees.

    Bring it on!
  • Negative comments are Telstra shareholder

    I find it funny how greedy Telstra shareholder posting lots of negative comments.

    Telstra seperation is good for consumer. The government have done a fantastic job for standing up to Telstra.
  • Government standing Up to telstra

    Hello. Since when was it anywhere near democratic for a GOVT to stand up to a COMPANY. I guess you thought Tienanmen Square was a picnic too? Government makes the reulations such that all companies can operate within a known framework and have some business certainty. This is SHOCKING. Telstra WAS a government property, it sold most of it ... SOLD it for a very fair dollar - some say Telstra II was a total rip off - markets proved that correct - and 2 weeks ago the GOVT's Future Fund sold down 2/3rds of its share holding - FUNNY COINCIDENCE - 2 weeks before the company is split in 2 by some Left Wing Ideologues. Rudd has shown his true Colours - they are RED ...
  • Kevin

    Blame the previous Howard Government for not splitting up Telstra.. and Howard also shown his true Colours, which is DIRTY RED....
  • Those shares hey!

    Your shares have bounced back in less than a day, idiot shareholder and may even pick up.

    Like your dopey mate at the other thread, wanna change your mind now and say buy Telstra shares and further prove Telstra were lying all along about the affects separation would have on their share price
  • Acsiano

    Acsiano owns rail networks, mostly bought from the government. Will the govt next say ... Well Chum's time you separated your traffic from your assets - split off rails and haulage boys.??? How can it be less than a police state when goverment to so interfere with a company. Further or is that Fuhrer ... recall the Germans lauding the rise of Hitler- he had a similar separation deal ... for the Jews! .... and how the german public went along with it all. Learn from history or be doomed to repeat it.

    The Hawke Keating years disguised the socialist nature of the Labor Party. However they have not lost their spots, they will "act in the public interest" wherever a weak minded electorate allows them.

    Telsta IS a Tall Poppy, born of Aussie innovation and built strong over many years, one we should be proud of - it has provided services that were clearly unprofitable eg. public phone boxes, for ever. It used its strength to develop the network for all. How well has ANY OTHER player added to national infrastructure. Would any other telco even try to provide the service coverage Telstra does.

    Seven years ago I demonstrated AGAINST Telstra, on my own in a Newcastle Shopping Centre outside a telstra shop, wearing a hand painted sandwich board. Their OLD copper wire service was breaking down in the hunter valley area area - actually it was the brittle copper wire casing that used to be used many years before the techs said. Fact: They have an OLD network that, like roads, like, water pipes, needs continual renovation. The fact is they are only able to maintain it by dint of their size, Would DODO, or Hutchison, do so??? So if you want service for all, get off the short term selfish city dweller Tall Poppy crusade, and start thinking long term.

    PS: The government should never have sold the TELSTRA infrastructure, that was stupid and that decision caused all the problems. However unless they are prepared to buy it back at a fair price, they are in my opinion overstepping the role of a government in the present circumstance.