[LINK] Telstra - taking its ball and going home.
foconnor at ozemail.com.au
Mon Aug 7 23:32:27 EST 2006
Gotta love the new Telstra management,
They get here, one of them lets the public know what he thinks the
value of a Telstra share is and lo and behold, it sinks to that.
They argue that telecommunications shouldn't be regulated (at least
that bit of the regulation that affects them) in this country to
ensure some semblance of service to the bush and areas removed from
exchanges. The government says no. They have a hissy fit. Share price
They use FTTN as a bargaining chip with the ACCC ... lose out, and
cancel any investment in FTTN. Share price drops again.
And it was purely an ideological dispute. One could argue that EVERY
damn publicity seeking debate we've had over the last 12 months has
been ideological. Management should be pragmatic, not ideological.
Now I have some sympathy with those who espouse little or no
regulation in telecommunications ... hey, it's all privatised now so
who gives a damn. Trouble is ... Telstra is coming off 20 years of
network neglect and little infrastructure investment, has been
actively pursuing business practices which have reduced their client
leverage (through those dinky copper wires) by charging like wounded
bulls for same - when to my mind the whole copper network was
probably amortised 20 years ago, have failed to take advantage of
their initial fibre investment by making any attempt to bridge the
last kilometer, have pursued rather inappropriate technologies in
their place (Foxtel and cable internet for God's sake! Wasn't that a
winner? They won't amortise that for another 40 years), got into
really dubious and sensationally non-profitable overseas investments
to absorb the mountain of cash they previously accrued. and now seem
into be intent on squeezing the last buck out of their ever
diminishing number of clientele ... who are leaving due to Telstra's
brilliant policy of charging them like wounded bulls for a copper
service that there are any number of existing alternatives to.
I mean, I have always seen ADSL as an intermediate solution until
when fibre or fast satellite or wireless became the norm. From
Telstra's perspective though it was another Golden Goose technology
(that they got into VERY late) that trapped people on the copper and
could provide a money stream for time immemorial.
Does anyone at Telstra have an idea of how they are effectively being
rendered into obsolescence by technology?
If they had had fibre to the node 10 years ago ... it may have helped
them. If they had had fibre to the home 5 years ago, we'd probably
all be locked in to Telstra's service ... no matter what they charged.
But now ... now real alternatives are starting to appear. Now the
copper wire really is on the way out, and Telstra doesn't have a
product leg to stand on. Third parties already provide IP pipes that
don't use Telstra's infrastructure ... and the number of these third
parties continues to grow. Technological alternatives for
out-reaching Telstra to consumers are becoming legion ... at a much
lower initial infrastructure cost than the current exchanges and
These days a high end router could probably handle a whole suburb's
need. Little numbers like 802.16n and the like point toward eventual
high speed wireless ... they don't mean that yet, but they point to
it ... and how much does a high end wireless router cost viz-a-viz a
full blown telephone exchange? Not a hell of a lot.
And despite this looming crisis, Nero "Fiddling while Rome Burns"
Trujillo and the lads from the US persist in peeing against the
political wind, seem absolutely bereft of ideas for increasing
business or meeting the challenge of the future, have actually
opposed ideas which would have ensured the telco's survival for a
number of years (eg. splitting Telstra wholesale and retail
operations), have made any number of current suppliers happy with big
orders for replacement obsolete equipment ... and have NO credible
strategies, ideas or tactics.
These guys weren't involved in Enron were they?
Anyway ... this weekend I'm gonna advise my mother to sell her
Telstra shares, as there is no hope for the company now. I'll tell
her to wait a few years before investing in the telecom sector again
(when new players have effectively wiped Telstra off the board, and
we have some idea who ... and what technology ... is going to be a
winner in the new environment) and in the interim invest her money in
blue chips with a future.
Trujillo said a couple of weeks back that he's be revealing a
strategy for Telstra ... well I hope he has the good grace to go down
with the ship. About the only 'strategy' left for Telstra is to
liquidate the over-valued double counted assets (the copper wire for
example is now probably worth whatever the price of copper is ... and
the fibre is only a half done job). That said, I'd hate to see the
boys from the US rewarded for conducting the fire sale.
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