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September 6, 2005
Telstra, Telstra and more Telstra
The news on the forthcoming sale of the remaining 49% public share of the Australian telecommunications giant is grim, no matter what view you take of privatising the public asset.
Few people will be unaware of the fact that I have been a critic of tranches-oriented privatisation of the telecommunications giant since about 1991. If you had to privatise the telco at all, then the Australian Government ought to have kept control of the physical infrastructure itself (including transmission towers for mobile and wireless communications) and everything else might have been sold off. That way we could have maintained some local manufacturing support, and used the infrastructure, connectivity and minimum universal service obligations as a bargaining chip with private players, and Telstra executives wouldn't have had any choice about the matter. If they wanted a stake in Australian telecommunications (including internet service provision, networked communications, etc) then they'd have had to lease Government-owned networks.
Oh well. Too late now.
But the news stories about the sale of all remaining control the Government has over the telco doesn't inspire one with a sense of confidence about the future directions and strategic planning of the incumbent company executives.
- Opposition spokesperson on telecommunications, Stephen Conroy, has requested an inquiry be set up to investigate the legal issues associated with the full sale of Telstra
- National Party "Man of the Moment", Barnaby Joyce, says he's happy with the details of the sale of Telstra. Well he's a fickle individual. This morning he said he wasn't happy with things and was going to take it back to his party, but I suppose he's had lunch since then.
- Telstra shares are the lowest they've been in more than two years, with speculation rife that they will drop below $4 a share sometime later this month.
- The Prime Minister has ordered Solomon Trujillo to reign in his staff, and blasted Telstra executives for their management tactics of the telco.
- Telstra's own webcast from CEO, Sol Trujillo and CFO, John Stanhope, announced that profits would be down 10-15% on 2004 figures.
So things are bad. And they're only going to get worse. Other than for mobile communications and broadband connections, I don't know how much I'll be using Telstra anymore. As a business proposition, we may well have to see what we can all do for the physical infrastructure, and perhaps share the cost of a new Broadband Powerline (BPL) network infrastructure. But for landline phone calls, I'm swapping to Skype.
Posted by jj at September 6, 2005 4:11 PM
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I can't believe that we are giving that entire infrastructure, that we paid for over the decades as taxpayers, to a private company as basically a free gift.
I also can't believe that there isn't a farmer out there who doesn't remember what happened to the pre-sale promises and assurances made by the government and the Commonwealth Bank. They got done over then and there's every indication that it's all going to happen again this time.
Posted by: Stephen Soymonoff at September 6, 2005 4:32 PM
There's been evidence that the bush and even "less advantaged" metropolitan centres were going to be completely decimated by the sale of Telstra (previously Telecom Australia) since about 1980, when British Telecom was first being prepared for sale. It's never been a good idea, and it never will be. But the economic rationalists will continue to argue that to better "serve" customers, it's preferable to take things out of the hands of the bureaucracy. Trouble is that never in the history of privatisation has there ever been any longer-term evidence of customer service improving for all customers as a result of selling off public infrastructure. Indeed, there is marked evidence that customer service has failed as a result. However, the rationale provided for such changes are always phrased in terms of economic efficiencies and shareholder satisfaction. And that's apparently acceptable to most people.
*shrugs* Maybe they're right? Maybe all that matters for public entities is the share price for investors, and the perpetual quest of getting more for less? But somehow, in this age of mass communication, I think the importance of telecommunications networks is increasing, not depleting as the networks age. And given the value of the system is increasing, I think it's possibly the worst time of all to abandon telecommunications carriers to the vagaries of capital markets.
jj
Posted by: jj at September 6, 2005 5:26 PM
You've articulated the major problem with privatisation (and indeed with companies in general) - customers vs shareholders. Legally, a company is required to do whatever is best for the shareholders in terms of dividends. Not in terms of capital gains or any other long-term benefits, but whatever makes the most profit in the shortest time. This obviously doesn't encourage long-term, strategic planning, but short-term, smash & grab tactics.
And when short-term gains are valued over long-term, it is usually the customers and employees who suffers. In the long run the company does too, but by then the people who caused the problem are gone and their successors are dealing with the problem in the same way. And so the cycle continues.
If examples are needed, look at the banks. Slash services, close branches, cut staff and raise fees - all to keep the share price and dividends up. The concept of service has long gone out the window.
Posted by: Stephen Soymonoff at September 6, 2005 5:49 PM
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