It wasn’t so long ago that Telstra was the company everyone loved to hate. It was even more hated than the banks.
In fact everyone hated it so much they wanted to punish it by keeping it in the public sector. Let it loose on the private sector and it will be unstoppable. Or, so the argument went.
However, it hasn’t quite turned out that way. Now that Telstra is no longer a public company – aside from the several billion tucked away in the Future Fund – no-one seems to care whether it lives or dies.
But thanks to the bidding over the $10 billion (you could bailout Detroit for that) national broadband network (NBN), Telstra is making front page headlines again. This time because it submitted a proposal for the NBN which was rejected by the government’s expert panel.
We aren’t entirely clear of all the criteria for the decision, mainly because we aren’t keen to read all 106 pages of the Request for Proposal document. Not forgetting the additional 13 ‘clarification’ documents which we have an equal disinterest in reading.
Yet we are eternally grateful to the executives at Telstra for their response to the proposal. It is – we think – a tribute to brevity. We haven’t had an opportunity to see the other submissions, but we seriously doubt if they could have put forward anything shorter.
Telstra’s proposal runs to a mere 12 pages. That is it. Based on that, we would have made Telstra the hands down winners. We would love to see the other proposals on the off-chance they have submitted something shorter. But we doubt it.
From where we are sitting there is a far bigger question. Rather than commentators grumbling that Telstra haven’t taken it seriously, they should be asking why it has taken the expert panel three weeks to read and respond to a 12-page document.
Especially when the rejection of it is due to Telstra having missed out by a technicality. That the proposal didn’t meet minimum legal conditions.
Alas, this is how a public bureaucracy works. The same bureaucracy that will be responsible for spending billions of dollars on infrastructure projects as part of the stimulus package. Good luck!
Too Late to Break Up Telstra
Although we may have been impressed with Telstra’s proposal, the market wasn’t. Or maybe it was the rejection of it by the government the market didn’t like. The Telstra [ASX: TLS] share price took a hammering.
It closed yesterday at $3.63, its lowest point in over two years. And it undid what had been a comparatively strong stock during the market downturn.
There are plenty of theories running around on what this will mean for Telstra.
One of the theories is that Telstra will clog up any attempts at setting up a broadband network in the courts for years. It will argue that the copper network is its property and cannot be used without reasonable compensation.
It’s a fair point. Like any business it is keen to retain its property rights and why shouldn’t it?
The fact is that the previous Liberal government stuffed things up by selling Telstra as a single unified company. If it had had any sense it could have easily split the company (perhaps on a state basis) into wholesale and retail companies.
This would have solved once and for all the issue of who owns the copper wires in each state. Over time there would have been some consolidation in the industry, but it would be a more competitive environment than we have now.
It would also have given the likes of Singtel Optus, AAPT and Primus the chance to buy selected parts of the network from the government. This could have potentially put the smaller competitors on an equal footing, or even a better footing than Telstra in some states.
Unfortunately, the opportunity has passed. The government now has two alternatives. It can either leave it to the free market to resolve or it can get heavy handed and start throwing its weight around.
Looking at the current environment, our guess is that the second option will prevail.