| Beware of Telstra's short-term focus, say competitors |
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| by Stuart Corner | |
| Monday, 12 November 2007 | |
  
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The CCC says it pointed out more than a year ago that "the underlying incentives in Telstra management bonus packages meant that they would pursue short term market share gains and be hostile to any policy that encouraged sustainable competition." CCC executive director, David Forman, claimed that: "The CCC released analysis in September 2006 that showed that Telstra's management packages encouraged the pursuit of market share over profit, and argued that this was not only counter to a decade of policy to introduce competition to telecommunications markets, but also not aligned to the interest of its shareholders." As evidence of Telstra's recent short-term focus on market share he cited the fact that it is growing broadband market share, which is now close to 50 percent and rising, and increasing its share of PSTN lines, bucking the trend of every other former incumbent telco. "It's incredible that they are actually gaining in the uptake of 20th century technology over 21st century technology." Announcing that result at the investor day briefing, Telstra CEO, Sol Trujillo said: "We are...world leading...because we're not losing PSTN lines. Q1 08 saw...retail PSTN and SIOs increasing 33,000 in this quarter. This compares with AT&T's and Verizon's PSTN loss which is about 8 percent." Forman warned that: "When Telstra management pushes it lines about regulatory and policy changes, both before and after the election, people should keep in mind that the interests of Telstra management are not likely to reflect the broader interests of Australian consumers, and maybe not even those of their own shareholders." In September 2006, Forman said: "Previously, management bonuses were at least partially tied to the fortunes of the average shareholder. The new all-cash arrangement unhitches management's pay structure from business profitability and share value. Telstra shareholders have been told that the upside for them will come in three to five years when the business transformation process actually begins to pay dividends. In the mean time, Telstra's management team is seeing the upside come in 12 month cycles." The original analysis was presented by Forman in a keynote speech at Media Connect's Influencer Forum in September 2006.{moscomment} |
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