Fowl play foiled, Telstra's fairy tale is over

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: