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Telstra spins « Previous | |Next »
October 9, 2006

I watch all the marketing fuss by Telstra over the week inbetween my weekend meetings in Brisbane. It's spin---a a corporate hard sell targeted to a specific audience. It takes the form of an advertising blitz designed to seduce us. An expensive ($42 a month) 3G mobile phone network is being sold as an amazing new achievement, even though it is no substitute for a high speed fibre-to-the-node network, or even the speedy introduction ADSL 2+ which Telstra refuses to build or turn on.

What is offered is not much. As Paul Buddle says the new 3G network:

is probably a bit faster than the existing 3G network, but who is going to spend upwards of $99 per month so they can make video calls over a mobile network? What Australia really needs is a high speed broadband network?

This service is for the 1%-3% top end of the mobile market, mainly in corporate or business applications. The slow broadband speeds in Australia are thanks to Telstra. Telstra's continued dominance and the lack of competition is thanks to the Howard Government. Telstra wants the government to give it regulatory holidays ---effectively sheltering it from the competition. So we are offered another mobile network instead of better fixed broadband services.

Admittedly, 3G indicates the beginings of the transformation of Telstra from a 20th century phone to a 21st century media communications company. What is being spuiked by the euphoric spin around the T3 float is lots of sweetners that cover up the big drop in share price, rising costs, low revenue forecasts, a poor operational culture and a drop in profits. It's not a growth stock---just a yield one. With the board guaranteeing a 28c-a-share annual dividend for 2006-07, buyers will get a 14 per cent return on the first year. But returns for the following six months when the second payment is due, are not assured. It's bait.

3G is the shiny new face of Telstra, which is a business under competitive pressure facing the continuing decline of its core fixed-line telephony and data business. Whether it can deliver on its promise of truly converged network remains to be seen. For the moment , as Paul Buddle says:

By withholding true broadband services from Australians Telstra can limit the traffic over its network and therefore fend off the need for a more rapid upgrade....Again it comes back to competition and the lack of a much stronger implementation regime of the proactive competition legislation that is already in place.

Telstra’s anti-competitive behaviour is the norm.

| Posted by Gary Sauer-Thompson at 9:10 AM | | Comments (0)