Presidential Flip Flops Leave Aussies Out in the Cold?

Donald Trump is extremely refreshing.

He’s what the people want.

A pollie that’ll speak his mind and doesn’t pull punches.

Of course, he has a history. He doesn’t always say the right things. A lot of the time he’ll make contradictory comments.

A man has created a whole new business off the latter by the way. Just another American job created by the Donald…

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Source: President flip flops
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Trump also has a superpower. One that all other pollies want.

His superpower is that he’s made of Teflon.

Nothing sticks to the man!

Well, nothing bad at least.

The Chicago Tribune likens it to another celebrity turned pollie, Ronald Reagan.

People my age remember Reagan as the Teflon president. The reason was that his personal charm and glibness enabled him to fend off mistakes and criticism, so much so that few of the barbs or accusations against him seemed to “stick,” just as nothing sticks to the bottom of a Teflon frying pan.

In just one example, when the nation was struggling with a poor economy in the early eighties, ABC journalist Sam Donaldson thought he had him on the hot seat: “Mr. President, in talking about the continuing recession tonight, you have blamed mistakes in the past. You have blamed the Congress. Does any of the blame belong to you?”

“Yes,” Reagan answered, “because for many years I was a Democrat!”

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Aussies firm no matter what Trump does

Trump’s latest flip-flop has got Aussies in a bit of hot water.

You might remember last year, the Trump administration banned any government communication infrastructure from housing Huawei tech.

At the time, an FBI director said, ‘Companies like Huawei pose a dual threat to both our economic and national security, and the magnitude of these charges make clear just how seriously the FBI takes this threat.

Trump then encouraged allies to follow suit.

So both Australia and New Zealand banned Huawei shortly after the Donald.

Germany and the UK still seem to be on the fence about it.

But now Trump is flipping again…potentially. Here’s what the President told reporters just days ago:

I want to have competition with China…Fair competition. I don’t want to block out anybody if we can help it. Now if there’s going to be a security reason or something, then we have no choice, but that is one of the things we’ll be discussing today. We want to have open competition. We’ve always done very well in open competition.

The Australian Financial Review (AFR) also wrote this on Tuesday:

Little-noticed Oval Office remarks by Mr Trump on Friday [Saturday AEDT] as he hosted China’s Vice-Premier Liu He have sent shudders through the diplomatic and intelligence community.

Reporters asked Mr Trump whether potentially dropping a series of US criminal charges against the Chinese telecom giant – announced late last month to great fanfare by a phalanx of top cabinet officials – would be part of the pending trade deal.

Is Trump going to reverse his ban on Huawei and leave Australia out in the cold?

He’s done a far bit of flip-flopping before.

This time, however, I think Trump will stick to his guns.

Even while meeting Chinese officials, the Trump administration continued to use words like security risk and threat, when talking about Huawei.

Whether Trump changes his mind or not matters little to Aussie pollies anyway. They’re firm on the Huawei ban and don’t seem to be going back.

Again, from the AFR:

Australia will stick to its guns on banning Huawei from the 5G telecommunications network even if the US backs down, and is encouraging a divided British government to step up to the plate in the Indo-Pacific region, Foreign Minister Marise Payne said during a visit to London.

As a result, it’s forced Aussie telco TPG Telecom Ltd [ASX:TPM] to write down a bunch of assets and waste a whole lot of money.

Aussie 5G turns into the Big Three

In a market announcement, TPG said the Huawei ban will force them to write down their mobile network by approximately $228 million.

TPG, like many other telcos use Huawei equipment throughout their network. It’s cheaper than the alternatives offered by Ericsson or Nokia.

Problem is TPG was depending on Huawei equipment to buildout their 4G network.

The plan was to spend $600 million rolling this network out. TPG was about $100 million deep when management decided to pull the plug.

The principal equipment vendor selected for use in the network [TPG’s 4G network] was Huawei,’ TPG told the market.

A key reason for the selection of the vendor and the design of TPG’s network was that there was a simple upgrade path to 5G, using Huawei.

In light of the government’s announcement in late August 2018 that it would prohibit the use of Huawei equipment in 5G networks, that upgrade path has now been blocked.

Since that announcement, TPG has continued to roll out equipment which it had ordered from Huawei prior to the government announcement, but the company has now reached the decision point for whether to place orders for additional Huawei equipment.

What you might find odd is that we have a bunch of Huawei tech in our 4G network already. But it’s off the table for 5G.

Seem a bit strange. If Aussie pollies knew Huawei was a risk, why would they allow 4G to start with? Anything to win votes I guess.

TPG’s sunk costs might not be all for nothing. The telco is waiting to hear back from regulators about their proposed merger with Vodafone Hutchison Australia (VHA).

The merger might be rejected because TPG and VHA together could reduce competition. But now, TPG doesn’t even have a fully functioning network.

That could give them some leeway to argue that their unfinished network is complementary and not in competition with VHA.

If the merger does go through, Aussie 5G will become a network of the Big Three: Telstra, Optus and Vodafone.

Huawei tech or not, whatever we get will probably be better than the NBN.

Your friend,

Harje Ronngard,
Editor, Money Morning

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Money Morning is Australia’s most outspoken financial news service. Your Money Morning editorial team are not afraid to tell it like it is. From calling out politicians to taking on the housing industry, our aim is to cut through the hype and BS to help you make sense of the stories that make a difference to your wealth. Whether you agree with us or not, you’ll find our common-sense, thought provoking arguments well worth a read.

Money Morning Australia is published by Port Phillip Publishing, an independent financial publisher based in Melbourne, Australia. As an Australian financial services license holder we are subject to the regulations and laws of Corporations Act and Financial Services Act.


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