Telstra chief finally ready for some action to win back market...

Telstra chief finally ready for some action to win back market share

* MARTIN COLLINS: John Durie
* From: The Australian
* March 30, 2010 12:00AM

TEN months into his reign at Telstra, David Thodey has finally unveiled his team to help him win back lost market share and regain sales momentum while preparing for whatever comes next from its talks with the federal government.

The change came with an implicit admission that the company is not performing well, mainly because of its own mismanagement.

To be frank, there is a lot more to be done. On any management model, 14 direct reports for Thodey is a nonsense. At best, yesterday's moves were just tinkering at the edges.

The company rightly played down the import of the changes but they were seen positively in the market as Thodey's attempt to revive his agenda.

The stockmarket reaction said it all. The share price was unchanged at $3.06 a share because, despite the management changes, the company is still mired in uncertainty.

Jaundiced investors who endured the bluster of the Sol Trujillo era are still waiting to see some earnings momentum to show for it.

On the very day the management changes were unveiled, the NBN Co put the issues into context, seeking expressions of interest to build its network.

NBN stresses the need to maximise local industry involvement. Formal requests for proposal are due to be issued in June or July.

While the likes of Leighton would be expected to win key portions of the contract, it appears NBN Co will split the multi-billion-dollar tender. The final cost of the build is still uncertain.

Key details, like whether Telstra ducts or utility ducts will be used, are yet to be finalised. While the government and Telstra have yet to come to terms, NBN Co is ploughing ahead, with or without Telstra.

That message is well understood by the company. But being understood doesn't mean it makes sense. Clearly it is in everyone's interest to have a deal between the two.

Back to the real world. Given the company has guided the market to expect a fall in sales this year, the changes will need to be seen to be adding to the sales line before Thodey gets credit for the changes.

He has to start somewhere. Yesterday's headline should have been Mr Nice Guy becomes Action Man after 10 months in the job.

The external threats explain why Thodey -- as much as Communications Minister Stephen Conroy -- wants and indeed needs a decision on the NBN.

Conroy has said it is a matter of weeks before he draws a line in the sand and declares that he has a deal -- or he will go it alone. The latter would be the second-best alternative for Conroy. But the way Thodey seems to see it, either option is a negative for Telstra.

Thodey is still talking to Conroy about potential mixed alternatives, but he too has a bottom line. He has made it clear he cannot accept a deal that won't receive shareholder support -- but that, of course, depends in part on how the deal is sold to shareholders.

The pressure is building on all fronts for Thodey. There's internal unrest at the lack of decisions and underperformance, all while the new chief executive settles into life under a very hands-on chair in the form of Catherine Livingstone.

The governance structure is corrupted further by having a fellow director, John Stanhope, as one of his direct reports. Stanhope got the board seat after missing out on the chief executive job.

While painted as the most hardline in the Telstra camp on valuations, he is a highly professional executive.

Telstra insiders reject out of hand any talk of splits with Thodey.

The two are said to work well together, even if they come to the table with different strengths, with Stanhope obviously the more numerate.

Thodey has integrated product pricing and promotion under one roof for the first time, under the control of former NSW bureaucrat Kate McKenzie.

He has also tapped Britain-based Gordon Ballantyne to run the key consumer division, which accounts for some 45 per cent of company sales.

Both appointments are not without risk. This is underlined by the fact they resulted in key departures, led by the highly regarded Justin Milne and close Thodey ally Glenice Maclellan, who left for personal reasons.

Ballantyne left his sales and service post at Deutsche Telecom's T-Mobile last September and served for just three months at Hewlett Packard before accepting the Telstra job.

He had expressed a desire to work and live in Australia.

Relative newcomer Robert Nason has emerged as even more powerful.

He's in charge of corporate strategy, M&A and productivity in what is a highly centralised management structure, with some 14 direct reports. Put simply, that is too many, even after cutting two direct reports. Thodey readily acknowledges this. It explains the fact the management structure is still a work in progress.

Company veteran Stuart Lee has been promoted to group managing director level with the key task of working with Thodey on different structural models for the company.

In short, Thodey wants to be ready for anything Communications Minister Stephen Conroy may throw at him, with either an NBN deal or potential break-up legislation.

Lee, who has been at Telstra nearly as long as finance director John Stanhope, is very popular within the company. He's seen as probably the next operations chief.

Inexplicably, Thodey has kept the "acting" tag next to the equally capable Michael Rocca -- again, it seems, in the name of flexibility.

While the structure may be flexible, it is highly centralised. This leaves little room for innovation down the line, or at the ends of the empire -- as shown by the gradual encroachment on Sensis and other divisions.

Milne's departure is a big blow. His background included time at OzEmail.

He combined marketing ability with technological knowledge, something few others share.

It is also noteworthy that Sensis boss Bruce Akhurst appeared in dispatches as being touted for other positions -- such as Australia Post, before Ahmed Fahour took the job.

In a sense, all of yesterday's key appointments, with the exception of Ballantyne, really date back to Ziggy Switkowski's time at the company.

Nason served as a consultant before pursuing other work, including a stint at Tabcorp. Nason, who was previously country head at AT Kearney, also did some consulting work for the company in Ziggy's time.

This involved a project aimed at reducing costs and increasing productivity. McKenzie was headhunted from the NSW public service where she worked in many roles including in Bob Carr's cabinet office.

She earned plaudits in her time as head of wholesale under Trujillo, where she walked the tightrope between ensuring relations were maintained with wholesale customers even though Trujillo openly said he wasn't keen on helping competitors.

McKenzie also handled regulatory affairs, all of which shows her to be extremely capable -- but somehow the words "product and marketing innovation" don't spring to mind.

Thodey has shown he understands the need to break down the silos within Telstra and McKenzie was chosen to fast-forward the process.

Thodey was left with a mess by Trujillo in a slow economy with the government intent on breaking it up, which is more than enough for any chief executive to handle. At least he now has his team to help him fight the battle.

For long-suffering shareholders and disenchanted staff, that is long overdue