October 14th 2006

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Articles from this issue:

COVER STORY: COMMONWEALTH-STATE RELATIONS: Will Howard override WA on natural gas?

EDITORIAL: Bushfires: an ounce of prevention

CANBERRA OBSERVED: Behind the move to lift cloning ban

INTERNATIONAL TRADE: Farmers protests over free trade in Cairns

TRADE POLICY: Why WTO trade talks failed

STRAWS IN THE WIND: The decline of Labor, the fate of Smith Street, Blair's departure and the Regensburg Address

NATIONAL AFFAIRS: T3 sell-off will not end Telstra's woes

HOUSING: Urban planning is destroying the great Australian dream

FOREIGN AFFAIRS: North Korea's nuclear ambitions: is China really powerless?

ANTI-LIFE CAMPAIGN: The selective indignation of Senator Stott Despoja

OPINION: The case for optional preferential voting

BIOTECHNOLOGY: The ascent of Mount Improbable

The debt trap (letter)

The Pope and Islam (letter)

The Ice epidemic (letter)

BOOKS: LONDONISTAN: How Britain is Creating a Terror State Within, by Melanie Phillips

BOOKS: SCOURGE AND FIRE: Savonarola and Renaissance Italy, by Lauro Martines

Books promotion page

T3 sell-off will not end Telstra's woes

by Peter Westmore

News Weekly, October 14, 2006
As News Weekly goes to press, Telstra CEO Sol Trujillo is fronting the financial markets to talk up the company ahead of the Federal Government's sale of a further $8 billion of Telstra shares, the third tranche of Telstra shares sold as part of the government's privatisation of the telecommunications utility.

Despite the hype, and the Government's attempt to nobble adverse financial comment on the deal, the fact is that Telstra's share price has been in decline since CEO Sol Trujillo was brought over from America to run the company in 2005, and at the time of appointment, not one of the nine brokers handling the sale actually recommended that its customers buy Telstra's shares.

Telstra currently has 1.6 million investors, the vast majority of them ordinary Australians who bought shares in earlier floats. The decline in the Telstra share price since the T2 float has scared off many of them.

The sale will go ahead with a number of share price "sweeteners", including the guaranteed dividend in 2007, a low market price and reduced up-front costs for investors.

Attacks on ACCC

However, the T3 sale occurs in the context of continuing attacks by Telstra management against restrictions imposed by the Australian Competition and Consumer Commission (ACCC) to prevent Telstra abusing its monopoly position. Among these are the wholesale prices at which Telstra sells its ADSL services to other telecommunications companies and Internet Service Providers, operational separation of Telstra's wholesale and retail operations, line rental charges and Telstra's treatment of customers and competitors.

To his credit, the Chairman of the ACCC, Graeme Samuel, has stood up to the barrage of criticism from Mr Trujillo and his fellow American senior executives at Telstra.

He told the Sunday program in August 2005: "I think that public aggression towards a government generally is not a very effective way of bringing about a desired result ... nobody likes monopolies except monopolists, and monopolists rarely act in the public interest. They almost invariably act in their own interest."

While the Federal Government clearly hopes the T3 sale will take Telstra off the public agenda, this is unlikely to occur.

Although the Federal Government will no longer have a majority interest in the company, it will still have a controlling interest as it intends to place the balance of its shareholding in the Future Fund, which it established.

Further, Telstra will invariably attract strong criticism for its attempts to reduce the number of available public pay phones because they are "uneconomical", and force up the price of monopoly services - particularly the copper wire network, exchanges and the fibre optic network.

-Peter Westmore is national president of the National Civic Council.

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