Tech Stream

Australian government proposes Telstra split

16 September 2009

The Australian Government announced yesterday that they were seeking to overhaul telecommunications regulation in the country, and that it was their “clear desire for Telstra to structurally separate, on a voluntary and cooperative basis.” The company faces restrictions on it’s business, like access to advanced wireless spectrum, if it does not split its retail and wholesale arms.

The media release from Stephen Conroy, Minister for Broadband, Communications and the Digital Economy is available here and coverage of the announcement is on ABC Online at Conroy Moves to Split Telstra and on ABC TV’s Lateline last night at Telstra Forced to Split.  Stephen Conroy also spoke with Fran Kelly on ABC Radio National Breakfast this morning about how the decision fits within the government’s vision for the National Broadband Network.

Shares in the company took a dive on the news and Telstra shareholders weren’t over the moon at the announcement, with chief executive of the Australian Shareholders’ Association Stuart Wilson telling ABC News that “It’s a situation where Telstra shareholders have purchased shares in good faith off the Government and then only a few years later the Government changes the rules and sets all sorts of limitations on Telstra to the point where profitability will be affected.”

Analysts like Paul Budde (speaking here to The World Today) are enthusiastic about the news and Telstra’s competitors have also reacted positively to Stephen Conroy’s announcement.  Optus welcomed the idea of a split in Telstra’s business, with their director of government and corporate affairs, Maha Krishnapillai, telling ABC Radio’s PM:

“This is a great piece of microeconomic reform by the Federal Government. Very clearly they are getting a competitive advantage today.  They have 60 per cent margins on their fixed communications networks. They make sure that it is as difficult and litigious as possible to access those networks.  They make sure that the quality of those services, let alone access to the IT systems from everything from billing to provisioning to turning on services, is as difficult as possible. So it isn’t just price. It is in fact equivalence of access to those services.” MP3 Audio link

ZDNet have more of the industry’s response and AM this morning reports that Australia’s consumer competition watchdog, the ACCC, is welcoming the breakup of Telstra with their chairman Graeme Samuel saying that consumers will be the winners if the companies splits:

“…there’s 21 million Australian consumers, about 16 million of them are using some form of telecommunications service and they are the big winners because at long last we’re seeing competition quite clearly infused into the telecommunication sector.” MP3 Audio link

But what does Telstra themselves make of it all?  Well their CEO David Thodey said in a statement that they were disappointed with the direction the government wants to go in but would play ball. ZDNet also have more on this, and we’ll have more in the Tech Stream on Friday.