The chief executive officer of Telstra saw his tenure cut short this week amid preparations for the AU$30 billion sale of the remainder of the telecommunications heavyweight, likely in early 2006. Following a board meeting on Wednesday, the carrier announced Switkowski will be out by July next year -- more than two years before the scheduled expiration of his contract in December 2007.
While some serious foul-ups occurred during Switkowski's tenure at the top -- including the problematic expansion into Asia, lagging revenues, a moribund share price, a failed plan to buy into media company Fairfax and, on the service front and some damaging outages at the BigPond Internet arm -- a large proportion of his difficulties arose from trying to find solutions to fundamental structural and market problems affecting the carrier while navigating a minefield of board and shareholder priorities.
Lumbered with a massive, ageing copper network, the telecommunications provider is in the uneviable position of trying to maintain healthy growth in new-generation markets such as mobiles and broadband while fighting a raft of fleet-footed competitors protected by an aggressive competition regulator.
The Australian Competition and Consumer Commission noted in mid-November in a telling critique of Telstra's market dominance and the threat it posed to competition that it was "difficult, if not impossible, to engage with Telstra senior management on issues that go exclusively to the concept of a 'wholesale' business [in the broadband area].
"This is not a criticism of Telstra senior management, who are doing no more than their jobs in maximising shareholder value by protecting their markets," commissioner Ed Willett told a telecommunications summit.
"Rather, it is a criticism of the existing combination of Telstra's market power, ubiquity and internal structure -- as well as the current regulatory arrangements, which are intended to deal with competition problems only as they arise". Seems to me what is being said here is that Telstra management -- including Ziggy -- are virtually required to undertake courses of action that bring them into costly, damaging conflict with theregulator. A challenge to any manager indeed.
In this environment, with the competition watchdog snapping at his heels (the regulator also recently said it would closely scrutinise planned deals between Telstra and Hutchison and Optus and Vodafone over third-generation infrastructure and market development), some looming problems in mobile margins, near-constant market speculation that he would be removed from his post (accompanied, unflatteringly, by sharp rises in the carrier's value) and pressure from the board, Switkowski must have felt under siege over the past few weeks. Little wonder the man is down with a nasty virus many in the media are speculating is stress-induced.
His successor faces the deeply unenviable task of managing this raft of issues in the context of a politically sensitive privatisation. It is little wonder that the government is keen on a replacement of international renown and experience in managing a privatised entity.
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