ACTU slams Telstra over its hard line on NBN

Stuart Corner
Monday, 27 October 2008 17:57

IT Industry - Strategy

The hardline stance of Telstra management on the National Broadband Network has stirred up a powerful new opponent: the Australian Council of Trade Unions which has been lobbying institutional investors claiming that Telstra is in danger of putting $11.9b of shareholder value and thousand of jobs at risk if it refuses to participate.

The ACTU has sent a research report - prepared ahead of Telstra's annual general meeting in late November - to Telstra's institutional investors accusing Telstra management of "jeopardising the company's future and...playing a dangerous game of brinkmanship by refusing to guarantee the company will tender for NBN."

Last week Telstra once again, and unequivocally, said it would not bid for the NBN unless the government first ruled out structurally separating the new network. Telstra Country Wide managing director, Geoff Booth was quoted in Rural Press saying: "We cannot submit a tender, we will not submit a tender … people think we're playing a bluff here, but I spoke to the chairman yesterday, and the CEO this morning, and the message is clear: we will not bid if separation is not taken off the table."

According to the ACTU, the report highlights an analysis by Merrill Lynch and Citigroup which recently identified non-participation in the building of the National Broadband Network as the biggest financial risk to Telstra in the future. "Citigroup has estimated a value erosion of $11.9 billion from the company – a loss of almost $1 per share — if the company lost broadband customers and network contracts," it says.

ACTU Secretary, Jeff Lawrence, said: "Telstra management has threatened to walk away from the broadband tender, warned they will not bid unless they can be assured of an exorbitant 18 percent rate of return, and is refusing to compromise on key aspects of the project.

"This aggressive and hardline approach is unacceptable. It is putting the long term interests of Telstra shareholders and the jobs of employees at risk. The National Broadband Network will be a crucial part of Australia's infrastructure for the remainder of the twenty-first century It is essential that Australia's biggest telecommunications company is involved in the tender."

He called on Telstra to "repair the damage it is causing by adopting a more co-operative and constructive approach to its relations with all stakeholders," adding: "We believe that a new direction is required on the part of the leadership team in order to protect the long-term interests of both Telstra employees and shareholders. The company should abandon its hardline approach to the broadband tender."

He also threw in a call for Telstra to "drop its aggressive posture to dealing with Telstra employees," saying that: "Institutional investors as well as the Federal Government will want to reduce all of the risks associated with a multi-billion dollar project such as this and so it will be essential for the successful bidder to have a stable and secure enterprise agreement in place."