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Friday, September 02, 2005

Telstra: Playing the Devil's Advocate

Ol' Sol Trujillo really didn't know what he was getting into when he took Ziggy Switkowski's old job at Telstra, did he? In other jurisdictions, it's simple - you get in, you slim it down, deregulate the pants off it, earnings go up, shareholders smile, winners are grinners, you move on. Aussieland isn't just any country, and Telstra's just not any company.

Let's play devil's advocate for a moment, though. Phil Burgess, one of Trujillo's `three amigos' (a racially tinged monicker I'm sure would have gone over a treat in America) has earned the ire of Peter `Turnbull? Malcolm Turnbull? Never Heard Of Him' Costello and John Howard for saying he wouldn't recommend Telstra shares to his own mother.

Is this surprising? Should it be? Only a few weeks ago, Finance Minister Nick Minchin conceded as such by proposing that the full sale of Telstra essentially be deferred and the government's shares instead be placed in the Future Fund for the very reason that it would be hard to get a good price for them. The Telstra share price has nearly halved since T2.

Let's be brutally honest. I'm no fan of the corporate structure - in fact I'm a major proponent of the theory that we should not let a construct that we created dominate us. But in its present state, a corporation's sole purpose is to return money to its shareholders. Trujillo's obligation is to facilitate this. Thus, it is not surprising that he would protest regulations that are not imposed on his competitors.

On the other hand, the reason government utilities exist is to provide essential services to citizens of a nation. Theoretically, they privatise utilities such as water, electricity and banking because they figure a corporation can do it better than a government can. But the minute this occurs, the government becomes just another shareholder activist - a noisy, influential one - but in the end, a voice on the sidelines. Once Telstra is sold, the government can call for as much regulation as it likes. It can throw as much money at rural areas as it cares to. But the fact that it needs to just shows how inherently incompatible the idea of privatising an essential utility like Telstra is with the original charter of such a company - especially in a country like Australia, where `essential' doesn't mean `nice' - it means `I'm trapped under my tractor 200 kilometres from the nearest hospital, please get the Royal Flying Doctors Service in ASAP'.

What it comes down to is that the privatisation of Telstra is ever more clearly an ideological pursuit of a government that can, not a government that should.

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