Stuart Corner
Monday, 09 October 2006 11:47
Opinion and Analysis
Page 1 of 4
The Telstra prospectus released this morning after late night negotiations between Telstra and the Government has painted a grim picture of the regulatory environment describing at as "the most significant ongoing risk to Telstra" and "value destroying".
The key paragraph is as follows:
"Telstra operates in a highly regulated environment that significantly affects its business. In particular, Telstra believes regulation can limit Telstra’s ability to pursue certain business opportunities and the returns it can generate for its shareholders. Regulation impacts the way Telstra does business and Telstra believes it is the most significant ongoing risk to Telstra. There can be no assurance as to future policies and regulatory outcomes. Regulatory outcomes may be significantly adverse to Telstra shareholders. Telstra believes the current regulatory regime is value destroying."
Telstra adds that it is "committed to seeking regulatory reform on behalf of its shareholders."
However there is a degree of contradiction in Telstra's stance on regulatory issues. Its decision not to proceed with the FTTN network because of regulatory risk has been well-publicised, and the issue is stated in general terms in the prospectus thus:
"Telstra seeks a competitive rate of return when it invests its capital. If Telstra cannot be confident that ACCC regulation of prices for competitor access to a new network will allow a competitive rate of return, Telstra will not invest in the network."
