Telstra lays into NZ telco regulation

CEO Sol Trujillo points to 'unprecedented value destruction' from separation

Fighting back against moves to split his own company, Telstra CEO Sol Trujillo gave New Zealand's regulatory model a serve at the company's investor day in Sydney this week.

Trujillo said around the world where incumbent telecommunications operators have been separated, there has been enormous destruction of value and a consequent impact on investment. (See also "Telstra's IT transformation hits speedbumps")

"They have unprecedented value destruction just with a single decision like that," he said. "So just agreeing to separation is the most value-destructive step management could take or a board could take. I should say a board because it is a board decision."

Trujillo says what happened in New Zealand was more forcible than what happened with UK telco BT, but the result, dramatic value destruction, was the same.

"And again, this isn’t an opinion, it’s not emotional, it’s facts: that you, if you are management and you agree to anything like that, it’s dramatic; there’s nothing you could do worse to destroy value than that," he told analysts and investors.

When operational separation was proposed for Telecom NZ, Telstra subsidiary TelstraClear supported accounting separation but opposed operational separation.

Telstra's chief operating officer, Greg Winn, took up the cry again in his presentation, saying separation drives costs.

"Who do you think is going to pay for it? Separation hasn't work anywhere. All you have got to do is look across the water – whether you look at New Zealand or whether you look at BT. Look at shareholder destruction and value; look at the lack of investment. It doesn't work. And you can take any expert, and I'll take them on any place, any time, anywhere, okay," he challenged.

Telstra's business and government chief, David Thodey, outlined improvements in Telstra's trans-Tasman network services delivered through the integration of its Next IP and Next G networks to allow customers to come in on a wireless data card direct onto a virtual private network.

"Now remember, this is very important for an enterprise, because you’re trying to deliver applications out into the desktop and into a mobile worker, and they get a seamless experience. So actually having that integration really translates into value for the customer," he said.

"We have linked the Next IP network into our core through Reach and the MPLS core throughout Asia, and into New Zealand. So now we’re talking about a trans-Tasman and an Asia IP core network."

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