tls broker consensus, page-3

any are wondering whether Sol Trujillo's take-no-prisoners approach will cost Telstra the battle and the war, write Elisabeth Sexton and Mark Coultan.


Used to winning … Telstra's chief executive, Sol Trujillo, may be employing a corporate strategy that has worked for him in the past.
Photo: John Woudstra
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THIS time last year Phil Burgess was outlining to journalists how he planned to do his new job as Telstra's head of public policy and communications.

Freshly arrived from the US, he nominated a role model for his dealings with the Federal Government.

"Qantas fights and wins, and people leave them alone," he said.

It was an understandable choice. Qantas and Telstra have a lot in common: both are former government utilities now answerable to shareholders; both have large consumer businesses based on well-recognised brands; and both have been forced by government policy to compete with new rivals.

A year on, Burgess and his boss, Sol Trujillo, can only dream of copying the success Qantas enjoys in Canberra.

Take the Government's decision in February to shut Singapore Airlines out of the trans-Pacific route: it was terrific news for Qantas and its shareholders, leaving prices paid by Australians flying to Los Angeles 20 per cent higher per kilometre than fares to London.

This is the kind of outcome Telstra was looking for when Trujillo and Burgess embarked on an unashamedly aggressive strategy of abusing both the Government and the competition regulator.

The benefits to shareholders of persuading the Government to offer some protection from competitors cannot be doubted. But the method the two Americans have chosen to achieve this business goal is looking less and less understandable as time goes on.

It involves openly challenging the value of competition policy, which has the voter-friendly aim of fostering lower prices and enhanced services for consumers.

Trujillo and Burgess have outdone Qantas in the fighting part of the formula, but the bits about winning and being left alone are yet to transpire.

It has been open warfare between the company and the Government since Burgess unveiled the new strategy last September by saying he would not recommend Telstra shares to his 88-year-old mother. The Prime Minister, John Howard, branded the remarks "careless and foolish" and relations have not been the same since.

This week, Trujillo and Burgess upped the ante by abandoning a much-trumpeted plan to invest $4 billion in a new fibre network, which would have replaced the old copper network in the major cities and allowed high-speed internet services.

Telstra squarely blamed the competition regulator, the Australian Competition and Consumer Commission, saying it planned to force Telstra to offer its rivals access to its networks - both the old copper one and the new fibre one - at prices Telstra believed did not reflect the costs of building and maintaining the networks.