future scenarios Analyses by Paul Budde: 22nd
1 Fish eats fish, eats fish Telstra
new takeover target
is massaging the trans-Tasman political environment
for economic harmonisation, with the aim of softening
the market for a takeover of Telecom NZ (if you need
more info on this ask me for a separate article on
the company might itself fall victim to globalisation.
If it continues to under-service the Australian market
it might create an opportunity for an overseas player
to come in, take over the company and utilise the
pent-up demand that exists in this market (Telstra
aims to only have 1 million broadband subscriber by
2005, while the market demand across the board is
currently estimated at around 2.5 million).
is now three years behind its overseas partners, and
with no significant new network infrastructure investments
under development that gap will only widen. At some
stage the Australian network will need to be upgraded
and if Telstra refuses to do this others might step
in and do it for them. With the new technology this
might not be so far-fetched not only can a
new nationwide network be built on technologies that
are a fraction of the price that Telstra has paid
for its network, the maintenance costs of these new
networks are equally low and this opens up opportunities
for companies that are not necessarily as large as
2 Over-regulated and irrelevant
the company isnt careful it will end up with
an over-regulated and far too costly network, mainly
concentrated on voice, while others walk away with
the far more lucrative and much less regulated data
market. While they are making money from these data
services, the companies can afford to offer voice
(VoIP) as an extra, at little or no cost to customer.
this scenario eventuates I can envisage a distraught
Telstra knocking on the door of the government, complaining
that it is left with a costly network and costly obligations
to provide a national service while others,
who have none of these onerous responsibilities, walk
away with the big money.
if this should ever happen, it should be remembered
that Telstra had the same opportunity as everyone
else to alter its business models to prepare for the
new world. It was their choice not to do this.
that being the case, I am sure that it will be the
Australian taxpayers who will pay the price for, either
by bailing Telstra out or by providing massive funding
for an out-of-date network which will, by then,
be even more obsolete than it is today.
3 - Mortally wounded after privatisation
I think it is unlikely, let us assume for a moment
that Telstra does become privatised.
will unshackle the government and, sooner rather than
later, a telecommunications policy will be introduced,
aimed at catching up with the rest of the world. Over
the last five years Telstra has slipped three years
behind in broadband developments and, given its current
plan of one million users by 2005, it will be at least
four years behind by that time. This will be unacceptable
from a national interest point of view. Both of Howards
Willing Coalition partners, Bush and Blair, are pushing
broadband Blair, in particular, has been instrumental
in lifting the broadband penetration in the UK from
3% to 23% within an 18-month period.
the Australian government will eventually follow the
lead of its counterparts and begin to stimulate the
broadbanding of Australia. The Minister for Communications
Richard Alston, is one of the most knowledgeable communications
ministers in the western world, and if he wasnt
such a political animal Australia could have been
right up there with the rest of the world. He certainly
knows what is required, but he cant deliver
because of Howards telecoms agenda, which only
has one item on it the privatisation of Telstra.
that issue and I believe Australias telecommunications
policies would change completely.
4 - A SingTel takeover not an impossibility
hate to think what this will mean for Telstra and
its shareholders. It has willingly been a political
football in the privatisation debate, using the situation
to strengthen its monopoly and cash itself up. However,
if it were to be removed from its position of privilege
its value would certainly not be much higher than
BT, AT&T and others. It is absurd that Telstra
should be valued at nearly 50% more than companies
such as these. I maintain that the government has
an obligation to explain this price difference in
its privatisation campaign, so that any new shareholders
enter the game with their eyes wide open.
the bottom line remains Telstra will only have
itself to blame if any of the above scenarios eventuate.
It has had plenty of time and plenty of cash to prepare
itself for the future but it has willingly decided
not to do this.
is not too late, but time is running out fast. Globalisation
remains a fact of life and, while Telstra might be
a big fish in the Australian pond, in the international
pond this is not the case. Time and time again it
has shown that it has very little understanding of
how to operate in the international market, where
it will be no match for companies like SingTel, which
has already positioned itself as the leading regional
telco. Who knows through Optus, Telstra could
end up being gobbled up by SingTel in the not-too-distant
5 Telstras infrastructure monopoly remains
ever, underestimate Telstra.
could maintain its supreme position in the market
and drip-feed the markets according to its own agenda,
completely disregarding the national interest. This
would have severe consequences for Australias
economic position. As an enabling industry the telecoms
industry should double its share of GDP before the
end of the decade, and you only have to look at countries
like Korea to see that this isnt impossible.
like their policies on pay TV and digital TV, the
Australian Government could continue to hinder economic
growth through ineffective telecommunications policies
and, instead, foster Telstras monopoly
especially since the privatisation process could be
dragged out for another 3 to 5 years.
it is not that leading Australian companies and organisations
are unaware of the situation. On the contrary, organisations
like ATUG and SPAN, and regulators such as ACCC and
ACA, have been clearly flagging the economic consequences
of the current governments policies (or non-policies).
However, to date, most of their comments, advice and
suggestions to the government have fallen on deaf
is said that a country gets what it deserves, and
if this country fails to understand the importance
of its knowledge-based infrastructure then we will
simply have to accept that we are going to miss out
on these new developments.