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Telstra break-up plan: rivals crow

Chris Zappone (Melbourne Age) | Sept. 15, 2009
Consumer groups and competitors have rejoiced at the Australian government's decision to force a structural break-up of Telstra

SINGAPORE, 15 SEPTEMBER 2009 -- Consumer groups and competitors have rejoiced at the Australian government's decision to force a structural break-up of Telstra, while the telecommunications giant's stock languished.

This morning Australia's Telecommunications Minister Stephen Conroy said the reforms, including new performance benchmarks, would be aimed at carving up the company with the goal of generating more competition and consumer benefits.

Telstra's competitors which include the SingTel-owned Optus - hailed the decision.

''Every minister since Kim Beazley has been bamboozled or prevented from reforming the telecommunications industry in Australia,'' Primus Telecom chief executive Ravi Bhatia said.

Mr Bhatia predicted that once the changes are enacted, ''it's going to be hugely beneficial to the competition.''

''If you look at the way the rules for competition were drafted in July 1997, although we had competition, our hands were tied because we couldn't get the right terms and conditions and prices because Telstra was simply too big and owned everything,'' Mr Bhatia said.

Mr Bhatia said Australian telecommunications customer service had lacked in successive years, while services companies such as Primus were forced to purchase services that "seemed to have inferior reliability and inferior pricing" from Telstra.

''In relation to pricing disputes - and there were a lot of them - between companies like us and Telstra, it took years to resolve them.''

Mr Bhatia said the changes will mean cheaper broadband, pay TV and possibly even mobile phone services.

''The next step is execution of this legislation,'' Mr Bhatia said. ''Let's keep going and get it done.''

Fellow Telstra competitors Optus and iiNet made similarly positive statements following the announcement.

Share prices

Telstra shares slumped on the news, after a delay at opening, to trade down 14 cents, or 4.3 per cent, to AUD$3.11, in afternoon trade.

''It's going to impact the share price pretty heavily,'' said Wise Owl.com's equity analyst Joshua Terlich but the news had ''been flagged for a while.''

Today's announcement was just confirmation of the Government's position, Mr Terlich said. But it is ''always a cause for negative sentiment in the short term.''

Watchdogs rejoice

''It's long overdue,'' said Gordon Renouf director of policy and campaign at consumer group CHOICE.

''In the short term Telstra shareholders won't be particularly happy but what we won't see is that it is in fact good for all other businesses and their shareholders should be happy.''

The Australian Communications Consumer Action Network hailed the announcement.

''The structural separation implicit in the Governments' proposals plus improvements to the consumer protection regime may at last provide for vigorous competition in fair and informed markets,'' ACCAN chief and ex-Australian Competition and Consumer Commission member Allan Asher said.

 

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