Michael loves the colourful phase like his ilk at SMH
Business acumen writing is something Michael knows little about
If you want to dump TLS, there are plenty of ways to do it .............
But this NOT one of them
"Telstra up for sale - again Michael Pascoe May 5, 2009 - 11:05AM
On the day the Federal Government announced it was going into the broadband cable business at a wild guesstimate of a headline-grabbing price, I heard a radio interview with an Optus spokesman memorable for the question not asked.
The Prime Minister had barely finished describing it as the biggest construction project since building the Himalayas and digging the Amazon when the Singaporean telco jumped to offer its bits and pieces of cable and twine in a barter deal for a slice of Kev's super-duper highway.
If relief has a scent, I smelt it wafting from the radio.
"Whew! That was close!" an Optus spokesman didn't blurt. "Saved by the government! We were really worried we might have won the tender. What a disaster - has everyone forgotten how much we blew on the stupid cable TV rollout?
"Let's see if Kev wants to take all that damned glass fibre off our hands."
The spokesman actually was asked how much the existing Optus optical fibre network was worth, how much they'd want for it. The spokesman didn't venture a price.
The missing question, though, was how much the existing Optus network would still be worth if Canberra didn't buy it and rolled out its new-improved extra-super-duper cable alongside, over the top and all around it. I suspect the answer would be something like "not much at all".
The same question applies to Telstra - and it's much harder for Telstra to answer in its present state of flux.
With the main shareholder publicly kicking heads, no real CEO, an obstreperous lame duck chairman, a board and senior management destabilised by the need to fill those two positions and a share price noticeably underperforming, Telstra must come to terms with the loss of not just another battle, but the war itself.
The Trujillo/McGauchie leadership declared a jihad to protect its near-monopoly network, dug elaborate defence trenches, laid mine fields, installed machine-gun posts and occasionally used poison gas - or at least some smelly PR.
And Canberra has just walked around all those defences, making them redundant.
Which is why the big question for whatever evolves as Telstra's leadership is not whether to finally split the company, but how much barter value might be extracted for its network.
Valuing Telstra extensive fibre optic network will not be easy. The replacement cost would be huge - but irrelevant. Its discounted cash flow would be diminished if it had to compete with Kev's Super-Duper, never mind the extra capital that would need to be spent to be able to compete.
On Canberra's side, vast amounts of scarce cash could be saved if the Telstra network were acquired for mere shares in the new national carrier - and I suspect that is what will seal the deal.
A large number like $43 billion makes for a catchy headline, but it's one more figure Wayne Swan doesn't want to add to his out-year deficit projections, another dose of capital to raise in a world awash with government and government-guaranteed borrowing.
An attractive nominal value could be put on the Telstra infrastructure to pacify shareholders who would acquire most of the equity in the new network and the real cost of gee-whiz-it's-fast national broadband would be greatly reduced and the thing could be delivered much more quickly than by starting from scratch.
The war is over. Telstra lost. Now it needs leadership that can make the best of the peace.
Disclosure: The Pascoe family super fund holds Telstra shares, but thankfully not many.
Michael Pascoe is a BusinessDay contributing editor.
TLS Price at posting:
$3.25 Sentiment: Hold Disclosure: Held
(20min delay)