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Telstra's political folly « Previous | |Next »
February 19, 2004

What's going on with Telstra these days?

It's network needs renovating, rental fees are soaring, faults are increasing across the nation, the broadband service is poor, it lost billions in growth investments in Asia, and its shares are languishing. It has big problems with being just a telecommunications company. They have big media ambitions that go way beyond a content hungry Foxtel. Remember the plans to buy the Nine Network in 2000? (A $10 billion takeover of PBL.)

Now its senior mangement want to buy into the newspaper business! Spend $3.5 billion to buy Fairfax for heavens sake. They have a big desire to take control of a low growth Fairfax.

So the Government ends up owning a major media organization. The Prime Minister was briefed and he okayed it. Isn't the Government supposed to be getting out of the marketplace not crowding it out? Yet here is Telstra trying to become more of a gorilla in the marketplace.

I would have thought that it would have been politically impossible for a half-owned government Telstra Fairfax. It was political folly to try and do so in an election year.

I can understand the problem. The core business ---mobile phones--is not growing. And it is indifferent to developing high speed broadband. Optus is making the running there. Hence it needs a strategy of growth.

It's growth strategy seems to be that content revitalizes telcos. It was presupposed in AOL-TimeWarner merger, and in the current Comcast bid ($75billion) for Disney. Content plus distribution= increased long term shareholder value as a result of convergence.

Does Fairfax provide the right content forTelstra? Was it the live streaming news content for mobile phones?

| Posted by Gary Sauer-Thompson at 10:55 AM | | Comments (11)
Comments

Comments

Your summary is the reason we should have completely privatised Telstra by now. Anyone could see that rapidly changing technology was going to threaten enormous upheaval in the telecommunications sector. The last thing taxpayers need is to find themselves saddled with an outmoded behemoth, which could happen at any time. Big tick for the current govt on this issue.

Observa,
Do you mean that this is John Howard's way of walking through a political minefield?

Looks more like a receipe to destablise Telstra to me.

I simply refer to the govts decision to divest Telstra from public risk. The fact that Labor has opposed the sale now finds the other half devalued as fast movtng rivals nip at it's heels. Taxpayers don't want to end up owning an Ansett in a brave new world of Virgins.

The actual Telstra plan was to combine their advertising arm "sensis" with Fairfax. On some levels the plan made sense, but not political, which of course, is the bane of business.

Telstra is making a massive move into the DSL market, by the way Gary. You are wrong to say that they are indifferent to it.

Telstra through Sensis has a Yellow and White Pages monopoly, which is the jewel in its crown. Depending on the type of advert, the Adelaide YP is worth $40-50,000 excl GST, per page in revenue. It goes up by inflation every year and is a licence to print money.

Scott,
you are right. Indifference was the wrong word.

I should have said 'playing catchup' with Optus on broadband.

You should probably also bear in mind that Telstra bears the responsibility of upgrading RIMs all over the country, not a cheap thing, to let those of us stuck at 28.8 dialup get something more acceptble. Optus does not have this additional expense. Having said that of course, does not mean that I have any sympathies for Telstra, its just that its an issue to be aware of when comparing optus and telstra and the broadband market.

Kyte
Fair enough.But they all provide a shitty DSL service and charge huge prices for them.

Gary, I would *kill* for a shitty DSL at this stage. But I do take your point.

Just to illustrate the point about the danger to the taxpayer of owning a fast changing communications giant, todays Sunday Mail has a report showing land lines shrank by 1% or 120,000 lines last year. This, in a growing economy illustrates the risk to Telstra as more people move to mobiles. Just like Kodak being threatened by the digital camera revolution. Sell Labor sell!

Labor doesn't need to.The poltical reality is that
it all depends on the 4 Independent Senators.

Has Howard lost his nerve?