[LINK] RE: TELSTRA's $3 bn mobile play in Indonesia - Another costly and risky investment?

[Ian Johnston]

This story is now at
http://australianit.news.com.au/articles/0,7204,8760186%5E15306%5E%5Enbv%5E,
00.html
  -----Original Message-----
  From: Ian Johnston [mailto:ian.johnston at infobrokers.com.au]
  Sent: Monday, 23 February 2004 11:48 AM
  To: LINK
  Subject: TELSTRA's $3 bn mobile play in Indonesia - Another costly and
risky investment?


  Telstra's $3bn mobile 'play' by Michael West and Michael Sainsbury,
February 23, 2004
  Source:
http://finance.news.com.au/common/story_page/0,4057,8760186%255E462,00.html

  TELSTRA is set to spend up to $3 billion in Indonesia, launching a bid for
the one of country's largest mobile phone companies, Excelcomindo Pratama.
...
  --

  Another costly and risky venture?

  Telstra's loss-making investments, over the last decade or so, in overseas
and non-core business projects have resulted in major costs and risks for:

  * Commonwealth of Australia (on behalf of Australian taxpayers):  forgone
income tax revenue from Telstra.

  * Commonwealth of Australia:  greater risk exposures - financial, equity,
reputational and operational - from Telstra (see Note 1 below).

  * Telstra shareholders including Commonwealth of Australia:  forgone
dividends from Telstra.

  * The Australian people wherever they reside or carry on business:  fewer
and poorer quality services in regional and rural Australia, a less
efficient telecommunications system, and fewer advanced telecommunications
services (see Note 2 below).

  * Australia and its many small businesses:  less competitive in world
(export) markets because of Telstra's higher cost telecommunications
services.

  Perhaps there are good strategic reasons for Telstra - substantially owned
and effectively controlled by the Australian Government - to own and control
Indonesia's largest mobile phone company.



  Ian Johnston

  --

  Notes:

  (1) Greater risk exposures

  The Auditor-General's Report "Government Business Enterprise Monitoring
Practices: Selected Agencies", 24 September 1997 <http://tinyurl.com/2hr4a>
reported:

    The broad range of exposures which can be associated with the operations
of GBEs include:

    Financial risks - the operations of GBEs are either explicitly or
implicitly guaranteed by the Commonwealth.  Accordingly, the consequences
can be considerable for the Commonwealth if risks associated with the
financial obligations that GBEs take on are not adequately monitored and
managed.  In addition, there are risks that GBEs will provide risk adjusted
returns below industry norms, possibly insufficient to offset the
opportunity costs to the Commonwealth of its capital investment in them;

    Equity risks - the Commonwealth’s investment in GBEs is very significant
and it needs to be assured that its investment is adequately protected.

    Reputational risks -  the Commonwealth needs to be assured that neither
its reputation nor the reputations of the GBEs themselves (given the
attendant financial implications) are put at risk because of the activities
of GBEs.

    Operational risks - that a GBE will fail to deliver the services it was
established to provide.

    Environmental risks - GBEs operations may impact on the environment, for
example by contamination of land, and this may affect the achievement of
GBEs’ financial and environmental targets or expose GBEs or the Commonwealth
to significant risk.


  (2) Strategic framework for the information age: identifying priorities
for action

  In January 1999 the Federal Government published a "Strategic framework
for the information age: identifying priorities for action"
<http://www.noie.gov.au/projects/framework/reports/dec98_strategy.htm> which
articulates its vision and ten strategic priority areas for action for
Australia in the information age.

  This framework - under the heading: 2.3—ADVANCE THE GROWTH OF A WORLD
CLASS INFRASTRUCTURE FOR THE INFORMATION ECONOMY - emphasised that Australia
must remain committed to a world class telecommunications infrastructure
that is highly competitive, characterised by high bandwidth at affordable
prices, and readily available virtually anywhere in the country; and, that
it is essential that the supporting infrastructure is in place for the
effective business and community use of online applications and services.

  Comment: Four years on, we don't seem to be a lot closer to achieving
these aims.






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