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Wednesday, 11 March 2009 14:34

NBN will not happen but structural separation will says Gen-i boss

The departure of Sol Trujillo from Telstra will pave the way for structural separation of the carrier and the NBN is dead in the water says the Australian boss of Telecom NZ's giant services subsidiary Gen-i. What's more, regulation will continue to play a big role in the newly separated Telstra.

Phil Varney, a former BT vice president and now the general manager of the Australian office of Gen-i, a structually separated ICT services supplier with 3500 employees and NZ$1.6 billion annual revenues, says that Trujillo's departure will create a "vacuum" that will inevitably lead to structural separation.

"It is very similar to the situation we had in New Zealand when (former Telecom NZ CEO) Theresa Gattung was butting heads with the Government," Varney told iTWire.

"After Theresa left that paved the way for the inevitable structural separation that happened under the new CEO Paul Reynolds.

"Now that Sol Trujillo is leaving, a similar vacuum will be created at Telstra which could well end up with the new CEO leading Telstra toward structural separation."

Of course this is not the first time that Varney has spoken about forcing Telstra to structurally separate its wholesale and retail businesses. Earlier this year, he called for the forced separation of the wholesale and retail businesses of both Telstra and Optus to give smaller players like Gen-i a chance to compete.

However, Varney does speak from a position of experience. He was a vice president at BT during its period of structural separation, before joining the Telecom NZ fold and being on board during the structural separation of retail businesses like Gen-i.

"We are functionally separated. Gen-i is a standalone retail business. We're going through that process now; the accounting processes are all maturing and what an exercise that's been," says Varney.

"It's been a long time coming and it's obviously been a testing time for the business. However, it's making good progress and Paul Reynolds has got a lot of experience of these sorts of environments working at BT in the UK. It's working well."


According to Varney, Australia should take note of the Telecom NZ and BT experiences with structural separation.

"Frankly we looking to when is it going to happen in Australia," he says.

"Nothing is inevitable but it's desirable. We're now in a different market and I think Telstra can put forward a pretty strong argument that they're no longer a government owned organisation. They're much more looking after the shareholder's interests but corporate Australia isn't getting the right sort of deal and the right opportunity to see innovation in action.

"This isn't about anything other than a separation debate which from a retail point of view gives other people the same access to the assets that have been invested in over many years.

"It means I can't call up my mate in the wholesale division to get things that aren't available to my competitors."

While Varney has some pretty strong pro-separation views, he is also adamant that it can and will have to be worked out to be in the best interests of Telstra shareholders.

"It is no one's interests for there to be a duplication of infrastructure but there has got to be a fair return for Telstra shareholders," he says.

However, Telstra wholesale margins, while healthy, would have to be regulated.

"Regulation will be necessary because otherwise there will be price creep," he says.

Meanwhile, according to Varney, Telstra is missing out on nothing by not being part of the NBN process.

"I don't think the NBN will go ahead," Varney says.

"Telstra can already provide just about everything that the NBN proposes to do."

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Stan Beer

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Stan Beer co-founded iTWire in 2005. With 35 plus years of experience working in IT and Australian technology media, Beer has published articles in most of the IT publications that have mattered, including the AFR, The Australian, SMH, The Age, as well as a multitude of trade publications.

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