Stuart Corner
Wednesday, 03 January 2007 10:12
Opinion and Analysis
Page 1 of 2
It's the time of year for crystal ball gazing and while bold soothsayers might punt on some of the outcomes of the major issues facing our largest telco in 2007 and beyond, the less prescient need look no further than Telstra's annual report, as filed with the US Securities and Exchange Commission for what these issues are likely to be.
These risks are also highlighted in Telstra's Annual Review, for domestic shareholder consumption, but the
SEC filing contains much more detail more pessimistically presented.
The biggie is Telstra's transformation strategy and all that flows from it. But let's start with the ACCC's allegations that Telstra engaged in anticompetitive conduct when, back in April, Telstra increased the wholesale price of its basic access (line rental) service without making any change to retail prices. As at 30 December the maximum penalty which Telstra could face stood at well over $700 million, and is increasing at $3 million per day. On top of this, Optus has separately issued proceedings in the Federal Court over the same matter seeking damages and an injunction.
It would be no exaggerations to say that Telstra's future depends on the success of its transformation strategy, and the challenges should not be underestimated. In its annual report as filed with the SEC, Telstra says that "A transformation of this size, speed and complexity has not been attempted by any other telecommunications company around the world...Our transformation strategy calls for more deployments of more network technologies and IT support systems than we have ever attempted or that any major telecommunications company worldwide has successfully accomplished...We face significant risks that the technology may not be installed in a satisfactory manner, on time or within budget, and that the technology may not perform as expected and represented by our key vendors."
The risks of non-performance are many and daunting. They include those relating to speed of transmission, quality of service, costs to deploy and operate the new networks and systems, the ability to create and effectively implement new product and service offerings and the capability to integrate applications and create seamless interfaces with front office order-entry systems and back office billing and customer support systems. And, as Telstra points out "The risks associated with any one such deployment increase significantly as multiple deployments are being pursued simultaneously, each dependent in some measure upon the others being performed."
