Friday, 27 June 2008 19:31

The Telstra cost blow-out that led to a $7 billion bonus

When the previous Coalition Government in Australia sought to sell off the final tranche of Telstra shares in a process known as T3, an executive team led by Telstra CEO Sol Trujillo went on a month long roadshow that involved luxury hotels and high expenses as detailed in a Government report.

At the recent T[Life] store opening in Melbourne, Telstra’s flagship retail store in Victoria, Telstra CEO Sol Trujillo and Telstra Chairman Donald McGauchie faced tough questioning on reported cost-blowouts while selling the T3 shares tranche in 2006.

An article in The Australian details the costs undertaken to conduct the roadshow, which are also highlighted in a report by the Australian National Audio Office (pdf link). 

The total cost of the T3 sales effort is reported to have cost AUD $204 million, although over $300 million had reportedly been allocated for T3, and the Telstra team’s use expensive 5-star hotels (at well over $1000 per night) and private jets has been questioned.

The T3 tranche was expected to raise AUD $8 billion, but in the end raised $15 billion, a substantial boost over initial expectations.

In another article from The Australian, both Donald McGauchie and Sol Trujillo were questioned over the ANAO report’s findings.

McGauchie is reported to have said in a question over the reportedly lavish spending at the Melbourne T[Life] store launch: “It's nonsense, that's all I have to say. We raised $15 billion when we were expected to raise $8 billion.”

Trujillo was also asked about the spending, and in response is reported to have said: “You mean the success of a $7 billion capital raising above what the plan was? We're very happy with it. I think [former Coalition Government] Senator [Nick] Minchin who was leading the process was very happy with it."

In a report at, Trujillo is reported to have also said: “We're here to talk about our store opening today. I'm here running Telstra and very happy and satisfied and excited about what we're doing with our customers today."

When asked further questions, Trujillo referred to his answer that he was at the event to talk about the T[Life] store opening.

Continued on page 2.

In questions relating to any plans to work on Republican presumptive US presidential candidate John McCain’s campaign, Trujillo is reported to have replied “Nope.”

In questions on Telstra’s customers and upcoming profit results, Trujillo is reported by to have replied: "On August 11 when we announce our results, I'll talk about all the rest of the business. Today, I'm here to talk about T[Life].”

iTWire’s article on the T[Life] store opening, which noted Trujillo claiming that Telstra was “bigger than Apple”, Trujillo briefly showed off the upcoming iPhone competitor, the HTC Touch Diamond, and made no mention of reported plans by Telstra to also sell the iPhone 3G.

Telstra simultaneously opened three other stores in Victoria, in the suburbs of Geelong, Doncaster and Chadstone, with Chadstone soon to host one of Apple’s new retail stores later this year.

T[Life] stores closely follow the Apple retail ethos of plenty of products on display for consumers to test and trial, with a [my]place area similar to the Apple store Genius Bar, where questions are readily answered, along with a training “auditorium” where free classes are on offer to consumers.

The T[Life] stores also offer free bottled water, free mobile phone battery recharging and free laptop battery charging.

Telstra is reportedly also planning T[Life] stores in Adelaide and Perth, but on a smaller scale than the Melbourne and Sydney flagship CBD stores.

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Alex Zaharov-Reutt

Alex Zaharov-Reutt is iTWire's Technology Editor is one of Australia’s best-known technology journalists and consumer tech experts, Alex has appeared in his capacity as technology expert on all of Australia’s free-to-air and pay TV networks on all the major news and current affairs programs, on commercial and public radio, and technology, lifestyle and reality TV shows. Visit Alex at Twitter here.

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