Dissecting Telstra's web of confusion

Attempting to understand Australia's awkward marriage of telecommunications and politics has been difficult at the best of times. But the antics dominating the headlines here over the last two days have served to demonstrate that ultimately it's still the shareholders that count. And further, core business activities such as phones and bandwidth provision still matter most.

An update for those of you not following domestic affairs: Telstra, 51 percent owned by the Australian Government, is still reeling after its chairman Bob Mansfield effectively stuck his fingers up at the company's board by publicly resigning before the official Telstra press release emerged.

Mansfield, and his buddy CEO Ziggy Switkowski, have lost the confidence of the board – and shareholders – for repeatedly trying to diversify Australia's largest telco with all sorts of crazy ideas. They've had failed Asian investments that lost millions, an undersea cable project that still needs a massive injection of funds to stay afloat (as it were), and the purchase of local IT services companies including ASX listed Kaz.

But what's really riled the board and shareholders was when Mansfield took it upon himself to talk to Australian Prime Minister about the purchase of a media company he once managed as CEO for just 4.5 months. John Fairfax, publisher of national titles including the Sydney Morning Herald and The Australian Financial Review (our WSJ if you like), would help Mansfield turn Telstra into a communications company of sorts.

Hang on. State-owned media? Sounds a bit socialist to me, and very dodgy in a Queen's English democracy. The BRW thought so too, and published a report back in February detailing Telstra's plans for the media empire based on information leaked by an unhappy board member (see Crikey for a wrap of events.). It was the beginning of the end for Mansfield.

Now that the deed is done, shareholders voted with their wallets yesterday increasing Telstra's stock value by 3.3 percent. That meant valued Mansfield's exit was worth something like A$2 billion to shareholders (SMH).

So what’s next? On the business side, Telstra's CEO might also get the boot despite backing from the Aussie P.M. who called Mansfield a "good chief executive".

What I'm hoping, and what shareholders seem to be asking for, is something of a return to basics. Telecom services including broadband underpin the ability of any country's ability to compete on a global scale, and must therefore top the list of investments. And on that front, Telstra has attempted to ramp up broadband adoption by dropping its pants on pricing (although the Mansfield-backed $29.95 a month deal is not without controversy).

The broadband push is working to some degree because competitors and resellers of Telstra's broadband advertised new cheap services to the extent that the topic is a dinner-time conversation. A personal barometer for mass adoption is when my non-technical in-laws and siblings ask me for IT advice (broadband the latest subject).

But we're still not at the end of the road. Apartment-dwellers still cannot get broadband access unless they pay for an expensive (around (A$150 a month) wireless service like iBurst. And many country areas in Australia are still without broadband.

Sure, Telstra's problems are not on the scale of a company like WorldCom that also changed course thanks to a whistleblower. But I'd like to think it can at least get back to the main game of building the core infrastructure that runs this country.

Posted by markjones, April 16, 2004 12:57 AM | | TrackBack