Renewed push for Telstra sell-off
by Bob Briton The Federal Government has put the sale of the Commonwealth's remaining 50.1 per cent stake in Telstra back on the agenda with the introduction of legislation into the Parliament last week. The move still faces defeat in the Senate if Labor and the minor parties maintain their long-standing opposition. The Bill is one of a number previously defeated Bills that the Coalition is resurrecting. If they are defeated this time around, Howard may go for a double dissolution election. If he is re-elected, then the Telstra and other Bills could be passed by a joint sitting of Parliament. The Government has included a $181 million package of upgrades in the current legislation as a parting gift to the people of rural and regional Australia who, in future, may have to rely on "market forces" to meet their telecommunications needs. The package represents a compromise made within the Coalition after a marathon debate last week The latest proposal includes spending of $16 million on mobile phone towers, $5 million on an extension to the satellite phone scheme, $10 million on regional IT training, $24 million on the expansion of the availability of broadband internet services and a further $100 million plus in subsidies to telcos for providing greater broadband access in the bush. At best they would result in some short-term assistance, which would be quickly overrun by new technological advances. They contain no guarantees for the long term. The Government claims that these items will be provided whether or not the sale is concluded. This undertaking is not as impressive as it may seem at first. The carrier already spends approximately $250 million a year in maintaining its universal service obligations. Its total capital expenditure budget next financial year is expected to be over $3 billion. Deregulation inevitable The other half of the pact worked out by the Coalition involves the imposition of regulations on a fully privatised Telstra. If the Government can be believed, Telstra will have to fix its worst exchanges straight away, ensure that everyone in the country will have an internet access speed of at least 19.2 kbps, replace radio networks in remote Australia, maintain a regional presence with services like Telstra CountryWide and undergo regular reviews of services to the bush. Federal Communications Minister Richard Alston told the media last week that governments can regulate the operations of enterprises like Telstra whether or not they own a controlling interest in them. Elsewhere, on the subject of cross-media ownership, the Howard Government is arguing strongly against government regulation or intervention. It also argues strongly against cross-subsidisation which is to be ruled out under Competition Policy. Despite "undertakings" in the latest Bill that would commit future governments to Telstra-watching duties, it is not hard to imagine Richard Alston or some similarly motivated successor bemoaning government meddling in the telecommunications market. You can almost hear the promises of world-class services and cheaper prices already! Under World Trade Organisation rules presently being negotiated for the services sector, it would only be a matter of time before the government was forced to offer all Telstra's competitors similar subsidies or to cut the subsidies and leave people in the bush high and dry. Universal service obligations would be phased out and rural and regional Australians forced to pay the full cost (plus corporate profits) for their services. This is the only way that a deregulated, fully privatised Telstra could remain viable in the future and still provide comprehensive services. In the highly profitable areas which Telstra presently relies on to subsidise the more expensive remote ones it has private competitors. These competitors operate in select areas of the market and have no need to cross-subsidise other services. They can drive prices down in their niche areas to a point where Telstra cannot afford to cross-subsidise. Even with its promise of subsidies and government monitoring, not all Coalition MPs could be won over to the latest Telstra plan. Several National Party MPs have reserved the right to vote against the legislation. The National Farmers' Federation has welcomed some of the undertakings of the Government but insists that it needs to look further at the proposal. Over-extended There is even some caution over the idea in the corporate world. Telstra CEO Ziggy Switkowski is confident that the proposed extension to the corporation 's activities can be incorporated within existing budgets. Citigroup Smith Barney has apparently identified $1.43 billion worth of capital and operational expenditure savings for the future, fully private telco. Macquarie Equities expects good news for the sagging telco market as major outlays begin to be recouped and price/earning ratios start to look healthy again. Others, however, have seen fit to rain on the Government's parade. One fund manager expressed scepticism about the possible savings to be made by private telco masters to The Australian Financial Review last week: "Look at how many staff Telstra has cut already and I don't believe the regulator would be any tougher on Telstra if the company wasn't part government-owned. It's pretty arms length now." Telstra workers will certainly identify with these remarks. Other market watchers are concerned about the effect that a third tranche or even a series of offerings of Telstra shares could have on stock prices. The Federal Government says that it wants to retire its debt of $32.4 billion. The Budget papers suggested that the T3 sell-off would fetch $34 billion if Telstra share prices lifted to $5.25. Such a price has not been achieved since mid 2001. In fact, Telstra shares have fallen from $8.90 in 1999 to just $4.44 last week. There is only one way of retaining universal services at affordable prices, that is to restore Telstra to full public ownership and democratic control. To do this we need to build a left and progressive political force that is committed to the public ownership of Telstra and the public sector. The forthcoming elections provide an excellent opportunity for all those concerned for Telstra, along with Medicare, education, peace, and trade union and democratic rights, to build a movement and provide the electorate with a genuine alternative.