The accidentally tabled report is also providing some further food for discussion about the future of the company.
True, Telstra is in a difficult position, as it faces significant challenges that cannot be addressed without making some major structural changes to the way the company operates and sees its future.
This restructuring will be extremely difficult – under the previous management this topic was taboo and so the company is now suddenly faced with having to make decisions on the run, which is never a good thing to do.
However, this is a problem of its own making. The rest of the industry and the government have been discussing these issues for five years and are therefore in a much better position to plan their future.
This is clearly evident in the government plans. These are well thought through and give Telstra (and the Opposition for that matter) little room to manoeuvre. There is no way that these issues can be solved without structural changes. Telstra knows this and intellectually accepts the fact.
This new situation gives the company a unique opportunity to do a whole-hearted job here – to seize the bull by the horns and develop a long-term strategic plan for the company, albeit under pressure.
There is no simple solution, nor would it be in the company’s interest to simply decide between an option A and B. The valuation is an interesting element of it but it has not encouraged me to look at the situation differently.
The fact remains that the copper network is steam train technology and it should be remembered that the best ever steam train was built right at the end of the steam era. It could travel at 120mph, which is still a good speed even by today’s standards. However that era was over by then, and those very fast steam trains were scrapped at a value far below their original cost.
The same situation exists in relation to the copper-based network. Whether it is right or wrong, good or bad, that is the reality and there is no doubt that this will form a key element of any valuation discussion.
The end of the steam train era didn’t mean the end of the basic railway infrastructure however. That had, and still has today, an enormous value.
The current circumstances offer Telstra an excellent opportunity to jump from the age of copper into the new fibre era. What a fantastic opportunity, since everybody agrees this is where the future lies. There are many choices available to it and many new financial opportunities. For this it will have to think outside the box and to a certain extent ignore the current political and shareholder kafuffle. Telstra should not use the misguided tactic of delay – this could be presented to them by the Opposition who doesn’t have either Telstra’s not the national interest at heart but whose gaol simply is to derail the plan –to do a half-hearted job or to slide back into the comfort zone of the old copper era.
In the end it will come down to true leadership and nothing else. The question is: can the current leadership now make some important decisions quickly – decisions that will secure the company’s future and its future profitability. In my opinion the answer is yes.
Here are some of the options:
- It can sell certain parts of itself to NBN Co;
- It can still milk the copper network and generate profitable revenue for the next 3-5 years;
- It can divest the digital media elements of the company and create very significant new shareholders value;
- It can offer its infrastructure to NBN Co and take on outsource work for that company, which will deliver ongoing income;
- It can be the key builder of the value-added ICT infrastructure – on top of the basic pipes – needed for the various sectors that are going to form the basis of the digital economy;
- It can exploit the retail fact that it has 10 million customers;
…. and there are no doubt more options.
None of these options are mutually exclusive and combinations are possible. If Telstra plays it well I see more ups than downs.
Will this be easy? No. It will certainly require top quality leadership to guide the organisation through, and great vision will be needed to identify where the true value of the company lies and how to best develop strategies that will deliver the right outcome.
There is no doubt about the difficulty the organisation is experiencing, and I certainly don’t underestimate this. An acute juggling process will be needed to bring all the different elements together, but it can be done and I have faith in the capability of the current Telstra leadership.
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