Telstra's "loose cannon" management

Peter Mac

Two weeks ago Telstra, the nation's telecommunications service 
provider, acquired the Trading Post business, and its associated 
directories business Sensis.

Although Telstra is still 51 percent publicly owned, its 
management is already behaving as though it were fully 
privatised. Their acquisition program, involving the blending of 
print media with telecommunications and digital technologies 
businesses on a huge scale, is a classic example of business 
empire building.

Telstra bosses recently proposed to acquire the Fairfax group of 
companies. The Telstra board rejected the idea, but if it had 
succeeded it would have had enormous implications, since Fairfax 
is one of Australia's media giants. 

The sale is also a requirement of the proposed US/Australia Free 
trade agreement. The government recently wrote to the US trade 
representative apologising for its failure to get parliamentary 
approval for the sale and promising to keep trying!

However, there are still major misgivings from within 
conservative circles about the sale. In particular, there is 
concern that Telstra is not providing adequate telecommunications 
services such as Broadband to regional areas. 

This is hardly surprising, since provision of services to these 
areas is Telstra's least profitable activity. The Howard 
Government and the current Telstra management are concerned to 
maximise profits, rather than to provide a necessary public 
service. If the sale does go ahead, future telecommunications 
services to regional areas are unlikely to be maintained, let 
alone improved, without a massive price hike.

Telstra already has serious money worries. 

In its latest deal, to buy Trading Post, Telstra is said to have 
grossly over-estimated the value of the business.

None-the-less, Sensis and Trading Post bosses were seen living it 
up at the Melbourne Grand Prix after the deal was finalised. The 
deal follows a number of other "money's no object" acquisitions 
which have left Telstra massively out of pocket.

The Australian Competition and Consumer Commission (ACCC) has 
also demanded that it show cause why it should not be taken to 
court for anti-competitive practices. Telstra recently offered 
its retail customers products for sale at less than the wholesale 
prices it charged its competitors. It now faces a possible ACCC 
penalty of some $9 million.

Telstra's financial problems have been widely attributed to 
specific business activities. However, the problem stems from the 
original decision to privatise the organisation. Its wild and 
financially irresponsible behaviour is not what the public is 
entitled to expect from what is still essentially a publicly-
owned national asset.

John Howard complains that Telstra's continuing role as a 
government agency has interfered with its business activities. It 
is certainly true that its partial sale poses insoluble conflicts 
of interest for the organisation. However, the answer does not 
lie in flogging off the rest of it, as Howard maintains. The 
answer lies in wresting control of Telstra from the hands of big 
business and returning it fully to the Australian people. Only 
then can it give priority to providing a universally accessible, 
high quality and affordable service to rural, regional and urban 
Australia.