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Time to go, Sol?

Should Sol be sacked? Some pugnacious federal government backbenchers seem to think so.
Written by Iain Ferguson, Contributor
commentary Should Sol be sacked?

Some pugnacious federal government backbenchers seem to think so.

Iain Ferguson, News Editor, ZDNet Australia

The Telstra chief executive today announced a slide in annual net profit to AU$3.181 billion from AU$4.31 billion the year before -- the telecommunications carrier's worst performance since fiscal 1998, according to wire services.

Liberal backbencher Don Randall, who said earlier this week that the government should use its majority stake in the carrier to force Trujillo out, claimed today that he had a groundswell of support among his colleagues for his stance.

There is little doubt that many in the coalition are frustrated and angry at the abrasive stance of Trujillo's management team and the lack of share price growth in the lead-up to the proposed sale of the remainder of the carrier.

The latest full-year result -- a couple of hundred million dollars down on a consensus of analyst forecasts, according to wire services -- follows extensive public controversy over the abandonment of talks this week with the competition watchdog over a proposed AU$4 billion fibre to the node (FTTN) network.

The carrier's outspoken corporate relations chief, Phil Burgess, laid into the federal government during the briefing at which the abandonment was announced, claiming its telecommunications industry policy was "inconsistent and confused". His remarks were followed by an admission later in the day from a clearly disappointed Communications Minister Helen Coonan that she found Telstra's decision frustrating and "difficult to understand," particularly as the parties had resolved "98 percent of the issues" related to the proposal.

Some industry executives believe, however, that Telstra is merely playing games to force concessions from the government and the Australian Competition and Consumer Commission and plans to come back to the negotiating table at some point.

Despite the poor result and continuing embarrassment for Telstra's major shareholder, any move to purge the top echelons of the carrier would be both rash and extremely premature.

Trujillo's far-reaching program to transform and modernise Telstra is still only a few months old (the plan was announced on 15 November last year) and many initiatives are still in the early stages of development.

The chief executive told the market today the program would require the carrier to take "tough medicine" for a while yet, but that early results had yielded more than AU$150 million in expense savings and around AU$500 million in capital expenditure savings. Workforce reductions since 1 July 2005 amounted to 3,262 staff.

Trujillo also pointed to the fact the carrier's 3G 850 wireless network was on schedule for delivery by the start of the new year.

While Trujillo is carrying out his plans, the competitive environment for the carrier is only becoming more difficult. Rivals who lack Telstra's cobwebbed monopoly legacy are fighting with increasing vigour for market share in growth businesses, while the carrier is also continuing to fight the tight competitive constraints imposed on it by the ACCC, which restrict its ability to generate revenues.

The fact is that it is just too early to say whether Trujillo and his team are making real headway into taking Telstra where it needs to go. Transforming the carrier into a vibrant, customer-centric business will take a long time and a hefty dose of pain for shareholders and employees. This fact seems to be lost on a few politicians.

What do you think? Should Sol stay or go? Is he a liability or an asset to Telstra? Do you have an opinion on Telstra's financial and operational performance? E-mail me at iain.ferguson@zdnet.com.au and give me your feedback.

Iain Ferguson is the News Editor of ZDNet Australia.

To take your opportunity to vent about what's bugging you in enterprise technology, visit ZDNet Australia's disaster recovery blog, penned by myself and journalist Steven Deare. The blog can be accessed at www.zdnet.com.au/blogs/disasterrecovery.

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