Telstra peddles more myths on structural separation

Determined to keep Australia stuck in the past as the rest of the world moves on

Sydney, 10 October 2007 –Tell the Truth Telstra (T4) has today called on Telstra to stop misleading the public on structural separation.

In recent media coverage, Telstra has claimed that any operational or functional split in the company would destroy its share price, hold back infrastructure investments, cost consumers more in the long run, and simply could not be done.

The facts tell a very different story.

“Telstra is clearly fearful of losing its monopoly through splitting up the company, and is once again pushing outdated propaganda to persuade the public it can’t be done,” said a T4 spokesperson.

“The fact is that the US, UK and Canada have seen considerable benefits from splitting up their incumbent telcos, so much so that Sweden and New Zealand are planning similar splits. If Telstra could see past its management’s tired rhetoric, it would see those benefits, too,” he said.

“The argument that a split can’t technically be done is not true. In fact, the rapid developments in IP and broadband provide even greater opportunity to separate Telstra’s infrastructure assets from the services offered by its retail arm There’s no need for the network to own the retail relationship, and this has been demonstrated in the deregulation of other networked industries like electricity, gas and rail. International experience has actually shown significant financial and customer benefits of such a split.”

Just last week, the peak European regulatory body noted that EU states ought to investigate splitting dominant telecommunications operators into functional units as a means to improve competition and performance.[1]

“The disdain with which Telstra management has approached calls for an organisational split, and their refusal to even consider the benefits only suggests Telstra management has an ulterior motive: to entrench  monopoly power,” said a T4 spokesperson. 

Morgan Stanley predicts a three-way split of Telstra could increase its market value by 20 per cent[2]

Since British telecommunications giant British Telecom operationally separated its retail, wholesale and network access divisions in 2004 each sector has experienced strong share price growth and improved performance. Telecom New Zealand’s new CEO Paul Reynolds, was previously BT’s head of wholesale and when at BT found that all three parts of the business have experienced growth, innovation and built greater trust with customers.[3]

Furthermore market analysts predict that splitting Telstra into wholesale, retail and network units would create considerable value for shareholders,[4]and attract investment from buyers who can pay a lot for a piece but have no interest in the whole.[5]For example a wireless service provider might be interested in Telstra’s wireless business, but is not going to buy Telstra to get it.

Former BT CEO Peter Bonfield noted that a break-up of the company would achieve “greater transparency and help investors attribute value to each business.”[6]The benefits of this approach for BT have become so clear that Telecom New Zealand is now considering a split along similar lines.

Operational separation would mean better competition, lower prices and better choice for consumers

Reynolds stated the key advantage of BT’s split was that it allowed each division to focus on a distinct set of customers, and a reduction in organisational complexity meant that each division was able to be nimbler in decision making and innovation. 

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About “Tell the Truth Telstra” (T4) - http://www.tellthetruthtelstra.com/.au

The Tell the Truth Telstra (T4) campaign was launched in April 2007, to counter Telstra’s campaign of misinformation on telecommunications and broadband competition and regulation in Australia.

Tell the Truth Telstra is an initiative of Australia’s leading telecommunications carriers and Internet Service Providers (ISPs) including AAPT, Adam Internet, Austar, iiNet, Internode, Macquarie Telecom, Powertel, Primus Telecom, Telarus, TransACT, WestNet and Unwired.

The Tell the Truth Telstra (T4) initiative commenced with a united complaint to the Australian Competition and Consumer Commission (ACCC) asking it to investigate whether Telstra’s conduct amounts to misleading and deceptive conduct.

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