TELSTRA has lost one of its top executives, with Big Pond head Justin Milne stepping down.
The move comes as the troops within Telstra are said to be decidedly restless at the lack of action within the company as it attempts to match competition in a slow market.
All the talk about the NBN comes on top of this and just adds to a perception of a company in need of more decisive leadership.
Company boss David Thodey is close to completing his first year in the job and has yet to put his own management team in place.
There have been some changes around the edges, but so far there has been a lot of talk and precious little action.
This hasn't inspired folk internally or in the market, which explains the company's drifting share price.
Talk that NBN is the reason behind the stock price weakness is but part of the story, but it also shows that the problem is a lack of decision making.
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Related CoverageThodey completes Trujillo-era purge The Australian, 20 Jan 2011
Telstra revolution aims at NBN The Australian, 20 Jan 2011
Thodey ousts Telstra's Rocca, Quilty The Australian, 20 Jan 2011
Telstra marketing push beyond NBN Herald Sun, 7 Jul 2010
Telstra in from the cold The Australian, 25 Jun 2010
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Communications Minister Stephen Conroy loves political fights but is short on closing deals.
As this is the case, maybe its time for Thodey to pull down the shutters.
Milnes' departure would be a huge blow given his strong standing within the company and his leadership of what should be a key growth area, Big Pond, and all media content along with fixed-line assets.
Company representatives declined comment when asked about the move yesterday.
Thodey came to the job last May and has been forced to effectively make three profit downgrades, with talk being that maybe another one is pending.
All this chatter is itself of course a concern, even if only half of it is true, because it symptomatic of a company operating in limbo.
A whole raft of senior management is operating in acting positions and has done so since late last year when David Moffatt and Holly Kramer, among others, left.
Moffatt's position as head of consumer is being filled "temporarily" by Glenice MacLellan as a close ally of Thodey's from his business division days.
Company veteran Mick Rocca is acting chief operations officer, which is a huge job.
The head of wireless applications, data and services, Philip Jones, is also in an acting role and has been so for over three months.
The talk internally suggests the company is close to hiring an outsider to fill Moffatt's old job, but the question is when.
At its interim results presentation, the company confirmed it was losing market share in key broadband services.
Yet, apart from some belated price cuts, it seems to be doing precious little about it. That explains why morale isn't flash because the troops down the line are wondering what is going on and when decisions will be made.
The concern is in stark contrast to the old regime under Sol Trujillo, which was run under tight control, Sol's way, and anyone not on the bus was out the door.
But, importantly, many of the key positions were run by Sol's imports, which left a gaping management succession gap within the company.
Many of the locals who were here in Sol's regime are still in the same jobs but had departed imports in charge.
Trujillo, of course, failed to return the company to the profitability left by his predecessor Ziggy Switkowski, and the succession failure is yet further evidence of his management failures.
All the external focus on Telstra has related to the government's attempts to break it up via the NBN project and this uncertainty hasn't helped.
This is especially as those inside the company acknowledge the company needs NBN as much as NBN needs Telstra.
The company believes Senator Conroy when he says it will go it alone, which would add a whole new competitive dynamic at a time when Optus and others are running rings around the company.
Internal talk suggests Thodey may be planning a major structural revamp of the company in May, by which time he would know where he stands on the NBN issue.
Doubts dog Downer
DOWNER EDI boss Geoff Knox has managed to settle the market, at least temporarily, by declaring the company would not make a material equity injection to prop up the special-purpose vehicle used to fund the government's $3.6 billion Sydney suburban rail contract.
In fact he went further, stressing the company was under no obligation to supply more money and the funding was in place, so the only hit would come from increased financing costs.
The issue is how much more in costs.
But investors will remain nervous as Reserve Bank boss Glenn Stevens said yesterday that the global financial crisis was still with us and by no means history, even in boom town Australia.
One reason bank interest rates will rise faster than the RBA's moves is that Australian banks face a deluge of international debt refinancing from 2011 onwards coming from everywhere, from third-tier banks to second-rate European sovereign debt to the majors like the US and Britain.
Downer's stock price has fallen some 9 per cent over the last week, with an extraordinary 8 per cent of the stock changing hands in the last three days.
The reason is concern over the Reliance vehicle created four years ago to fund the project.
It is a highly leveraged vehicle with $2.4bn in debt and $137m of equity, half of which came from Downer and the rest from the AMP, RBS and old Babock vehicle.
The market had speculated that Downer mighty need to raise equity ever since Moody's and Standard & Poor's issued warnings about Reliance's debt.
This came in the wake of concerns over the monoline insurance companies which had credit-wrapped the debt at the height of the bull market.
Monoline insurers in the US are struggling to stay alive, with Ambac Financial Group being the next to hand in its chips with some $US35bn in insurance contracts being handed over to State regulators.
Reliance says its insurers FGIC and Syncora have not withdrawn from the project.
Downer's Knox rejected talk of any imminent triggering of the $357m in debt provided by NAB, Westpac and two Japanese banks.
He also made it clear that the company had no obligation to provide any more equity and was on track to meet all its commitments supplying the train, with the first being tested in Sydney in a couple of weeks, one more recently arrived from China where they are being built and another on the ship on the way across.
At the end of the day, Downer's job is to supply the trains, but the lingering doubts will remain until the finance is fully provided.
Pigs at the Trough
THE line says no government should waste an economic crisis and likewise every investor should learn from it as well.
Melbourne-based lawyer and journalist Adam Schwab has provided a good framework to start the process in his book Pigs at the Trough.
The title is a guide to how Schwab is approaching the subject, which sadly follows a well-rehearsed, cliched script that ASIC has failed in its job, non-executive directors were asleep at the wheel and the company chiefs were a bunch of greedy crooks.
Now some of this is undoubtedly true.
But, as this column has tried to argue, investors should look no further than their own mirror in working out where most problems start and where responsibility really lies.
Schwab is right to argue the importance of corporate governance because the close correlation between corporate failures and the absence of good governance is uncanny.
His book is a well-researched run through what he sees as the biggest governance snafus, including the Sol Trujillo era at Telstra, ABC Learning fiasco, MFS, Village Roadshow, Babcock, Allco and Great Southern Plantations.
The trouble is that these read like a hit list rather than evidence of a theme, because while Telstra had its issues under Trujillo, it is not in the same class as ABC Learning.
Like the doyen of the craft, Trevor Sykes, Schwab also clearly explains the basic economic and accounting concepts to make the book easily accessible to newcomers.
This is where the easy-to-read book excels.
However its conclusions and lessons to investors tend to be biased by his own narrow frame of reference and cliched responses.
http://www.theaustralian.com.au/business/opinion/big-pond-head-justin-milne-calls-it-quits/story-e6frg9if-1225846164378
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