[LINK] Telstra - taking its ball and going home.

[Adam Todd]

At 11:32 PM 7/08/2006, Frank O'Connor wrote:
>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.

Of course.  Because if you are going to SELL something, you want to reduce 
the price artificially before the sake of the share to attract BIG bidders 
who will then send the share prices through the roof with competition trading.

Better to have 10 shares for $10ea than 1 share at $100 that no one wants.

Then when you start to sell, your 10 shares go up to $12 whereas your $100 
share might stay the same!

>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 sinks lower.

:)

>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.

Gosh no.  If management were pragmatic and something happened, then there 
would be accoutable.  Being ideological ensures that anything that happens 
is not at the blame of managament.

>Does anyone at Telstra have an idea of how they are effectively being 
>rendered into obsolescence by technology?

No because there are too many people doing everything possible to protect 
their jobs and ensure they stay in there for another five years, rather 
than have some new geek come in and deploy new technologies for which 
Manager Brown knows nothing about and gets ousted!

>If they had had fibre to the node 10 years ago ... it may have helped them.

Heaps of Fibre all over Sydney installed by Telstra. But less than 20% if 
actually used.

>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.

Nearly major suburbs have Telstra fibre in the street.  I use to have maps 
and details that were up to date, but I dare say they are far more covered 
now than in 1995.

>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 wires.

Yes well when you have a regulatory scheme that TELSTRA/AKA Telecom fought 
very hard to HAVE IN PLACE to protect it from COMPETITION, what do you 
expect.  Competition finds cheaper, faster, more deployable means.

That's Nature.  Don't become obsolete by being obsolete.

>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.

But the real cost isn't in the router.  It's in the connection from that 
little router on your desk to the central switch/hub and the cost of the 
hub and it's configuration.

But the rest of your point I agree.

>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),

Oh come on!  For YEARS Telstra claimed that BOG POND was not in any way 
part of Telstra Corporation - except it had the same ACN.

And Telstra has constantly refused to break the company into separate 
entities for different functions because the profit and loss centres would 
become way too evident.

Then the arguments of one cost center "over charging" because i9t was near 
pure profit, whilst other centers were massively in loss would cause huge 
consumer uproar!

>These guys weren't involved in Enron were they?

Probably :)

>Anyway ... this weekend I'm gonna advise my mother to sell her Telstra 
>shares, as there is no hope for the company now.

You know, when the first round came out at about $6 wasn't it?  I told 
people they were over inflated and would never get the return they were 
being sold.  I don't think the shares have ever been higher than the 
original release price from what I recall and I'm sure someone mentioned 
this recently.

I'd suggest not selling the shares to be honest :)  Unless she needs the 
extra $10 cash, she's better just leaving them and taking in the 44 cent a 
year dividend.  One day, maybe, the value of a Telstra Share might be worth 
the fee to cash them in :)

>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.

Tell her to invest in me :)  I'm a sure thing!

>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.

Don't worry, China is in demand of copper and nickle now, so Telstra might 
just go to the expense of pulling up all the cooper, melting it and selling 
it to china to make a far greater profit than the cost of leaving it in 
place :)