The Guardian September 4, 2002

Telstra: Monstrous profits, job cuts and privatisation

by Peter Mac

Like the Commonwealth Bank last week, Telstra has announced a massive net 
profit for the last financial year, while simultaneously planning further 
job cuts in addition to last financial year's 4000 sackings. Telstra's 
full-time staff numbers have fallen by 47 per cent, or the equivalent of 
36,000 positions, compared to 1996.

At the same time some big investors are not content with Telstra's profit 
of $3.66 billion, which was down some 9.7 percent on last year's result. 
This was partly the result of its disastrous investments in various high-
tech "bubble" companies, but also its dealings with Foxtel, which cost it a 
cool $48 million last financial year.

Despite this, Telstra now plans to enter into a formal link with Foxtel, 
which also has an alliance with Optus. The proposed arrangement is being 
examined by the Australian Competition and Consumer Commission.

Telstra management's sympathies are clearly with the big investors, such as 
the investment banks and superannuation companies. Ignoring the fact that 
the organisation is still half-owned by the public, Telstra chief executive 
Ziggy Switowski recently declared loftily that "the board and management 
fully support the full privatisation of the company and look forward to 
being able to operate on an equal footing with other companies in the 
global market."

And there's the rub. Underlying all the discussion about Telstra's 
corporate performance is the Federal Government's plan to sell off the 
remaining half of Telstra that remains in public ownership.

Some of the fiercest opposition to the sale comes from rural communities. 
The Government is carrying out an inquiry to show the level of 
telecommunications provided to rural and regional communities is 
satisfactory. Then it can sell off Telstra.

This is based on the false premise that selling off the organisation would 
be acceptable as long as country people appear to have a level of 
telecommunication service comparable with that enjoyed by city folk.

The argument totally ignores the fact that a 100 percent privatised Telstra 
would be even more motivated by profit, and even less willing to show 
responsibility to the public, and that nowhere would this be more in 
evidence than in providing expensive telecommunications services to the 

Last week three independent federal parliamentarians representing rural 
communities announced they would carry out a survey to determine their 
constituents' satisfaction with Telstra's current level of service.

They argue that the sale should not go ahead, and that on current 
indications some 80 percent of their constituents are opposed to a further 
sale of the organisation.

The Government proposes to guarantee a satisfactory level of service by way 
of "universal service obligation" laws.

The three Senators did not swallow this line, as the Government has not 
bothered to enforce similar legislation that already exists with regard to 
the current semi-private arrangement.

Indeed, as they have and others have pointed out, Telstra has actually cut 
its level of investment in basic phone service infrastructure by $600 
million, as well as cutting 4000 jobs last year.

Regardless of what guarantees the Government offers now, there is no 
certainty that they will be upheld.

Higher prices

ALP spokesman Lindsay Tanner commented "and, of course, over the past 12 
months Telstra's prices have been going up in mobile phones, text messages, 
home-line rentals, the Internet on virtually all the things they provide".

The Deputy Prime Minister responded, perhaps more honestly than he 
intended, that: "When a government has a commitment to rural and regional 
Australia, and the willpower to put in place an effective universal service 
guarantee, and to pursue it and make it work, you'll get the services you 

This is true. It confirms the need for public ownership, as the private 
sector could not deliver such guarantees.

To fully privatise Telstra, the Government must first get the agreement of 
the National Party (which is the aim of the inquiry) and then get its 
legislation through the Senate.

The gang of five  Meg Lees and the four "rebel" Democrat Senators  
could play a crucial role if they voted with the Government.

There is a possibility that if they're not successful in forcing comprises 
within the Democrats as the price for unity, the gang of five might form a 
new party or a loose coalition.

Either way, unless subjected to enormous public pressure, there is the risk 
that they will vote in favour of selling the remainder of Telstra, thus 
fulfilling the odious agenda of the Howard Government and the 
telecommunications giants.

For the people of Australia it will lead to more job cuts, higher prices, 
less reliable services, and no guarantees of affordable access or other 
social considerations, especially in rural and regional areas.

Back to index page