The Guardian July 2, 2003


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.

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