TelstraClear 'weakened' – Budde

Telstra departure leaves an uncertain future, says analyst

The departure of Telstra CEO Ziggy Switkowski announced last week will weaken the position of local subsidiary TelstraClear, telecomms analyst Paul Budde says.

Budde says TelstraClear is a “marginal” business because it hasn’t succeeded in taking on Telecom in the New Zealand market. He suggests Telstra should sell its subsidiary, but says that isn’t likely to happen before the Australian government sells its remaining half-share in the telco.

“Selling TelstraClear ahead of privatisation would be very disruptive for Telstra, and that’s the only thing working in favour of the New Zealand operation currently,” he says.

Telstra started the search for a new chief last week after announcing current CEO Ziggy Switkowski will leave his posted by July 1, 2005. Whoever lands the new CEO spot at Telstra will have a tough job ahead of them, says IDC NZ analyst Chris Loh.

Loh, IDC’s senior analyst, telecommunications, says Switkowski was the last of the “old guard" telco heads, following changes at the top at Deutsche Telekom, BT Group and other carriers. His successor will need to be a “transformer”, Loh says, able to deal with Switkowski’s legacy as well as looming issues that Telstra faces with privatisation.

“They had a strategy going into Hong Kong which really failed in a big way,” Loh says. “That’s really going to limit the person coming in.”

TelstraClear chairman David Thodey is one of the names tipped for the top job at Telstra, but IDC expects the Telstra board to look outside Australia for a new CEO, Loh says, “and certainly not internally within Telstra.”

“When someone new comes in they’re going to have to pull out all the Switkowski supporters,” Loh says.

“They’ll need to be politically savvy also. It’s going to be a difficult job.”

Loh won’t be drawn, however, on what the change at the top of Telstra is likely to mean for executives at New Zealand subsidiary TelstraClear. TelstraClear is run as an independent subsidiary, he says.

“TelstraClear don’t have the same challenges over here because they’re not the incumbent [telco]. It’s a completely different situation.”

Switkowski is seen as a strong supporter of local CEO Rosemary Howard. Asked whether Howard’s position is at risk, Loh says “I don’t really have an opinion on that.”

Despite Budde’s pessimistic assessment of TelstraClear’s prospects, he says Howard’s job may be safe.

TelstraClear spokesman Mathew Bolland says “It’s business as usual” at the local subsidiary.

In a statement last week, Telstra chairman Donald McGauchie said the board remains committed to the current strategy and praised Switkowski for leading the company through “a particularly complex and demanding period in the telecommunications industry.”

Switkowski's last day will be July 1, 2005 or possibly earlier, if the telecommunications company finds a suitable replacement before then. He will depart with a payment of A$2.092 million, as agreed under the terms of his contract.

Switkowski says he will leave the post knowing Telstra is performing well and in "sound shape".

The Australian government is preparing a scoping study on the best way to sell its remaining 50% shareholding in Telstra. Australian Communications Minister Helen Coonan says a decision to proceed on the study could be taken by Christmas, with results expected around April.

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