When Trujillo and company presented that fateful 54 page document titled "The Digital Compact & National Broadband Plan" to the Federal Government on 11 August, Telstra laid the groundwork for far more than speculation over a possible breach of disclosure rules. Aside from the compliance questions it raised, the market sensitive information contained in that document revealed in the most brutally frank way the truly sad state our large carrier finds itself in today. What is truly amazing is that this information had not been made available to the Government, let alone the market, until last month.
If Telstra is to be investigated by regulators, the extent of the investigation should not be limited to the current management. Telstra went to the Government in August and laid its cards on the table face up. "We should have spent $2-3 billion over the last 3-5 years upgrading our infrastructure. 14% of our lines have faults, we have obsolete equipment, and our legacy IT systems can't cope," Telstra said. "Our high margin PSTN revenues are going down the toilet and we've had to dip into our reserves to pay our shareholders the dividend they've come to expect," Telstra added. This sudden attack of frankness was of course designed to soften the Government's stance on its regulatory regime, as well as to outline the new management's vision for the way forward. As we now know, the Government didn't buy any of it.
In laying its cards on the table, however, Telstra may well have opened a Pandora's Box. The carrier must have known the true state of its business for some time, including the need for infrastructure investment, the poor state of its lines and even the ability of the carrier to sustain dividends. Was the market informed? Indeed, if billions of dollars were needed for infrastructure investment, why was the company spending billions over the past five years on questionable acquisitions? Just last year, Telstra spent $1 billion on an IT outsourcer and a publishing company. Why wasn't that money put toward the much needed upgrades to its infrastructure? Why does Telstra, by far our largest telecommunications carrier, still have no credible wireless broadband or VoIP or fibre to the home strategy?
These are questions to which the new management of Telstra knows the answers. However, whatever one may say about their methods, they cannot be blamed for Telstra's sorry state today or for telling it like it is. It was the previous management that was fiddling around with failed ventures and acquisitions instead of sticking to its knitting at home and it is the previous management that must shoulder the blame.
