Australian phone giant Telstra faces breakup

Sep 15, 2009, 6:24 GMT

   Sydney - Shares in Australian telecommunications giant Telstra Corp fell sharply Tuesday after the government ordered the separation of its wholesale and retail operations.

   The dominant carrier's stock value fell 5 per cent after an announcement from Communications Minister Stephen Conroy that the former monopoly provider would be shut out of a new broadband network unless its wholesale and retail operations were separated.

   'These historic fundamental reforms address the long-standing inadequacies of the existing telecommunications regulatory regime,' Conroy said. 'We believe it's possible to achieve a win-win outcome in the interests of Telstra, its shareholders and, more broadly, all Australians.'

   Telstra is being given little choice because failure to restructure would exclude it from being a partner in the government's programme to lay a national broadband network valued at 43 billion Australian dollars (35 billion US dollars).

   Conroy has invited Telstra to submit plans to the competition watchdog, the Australia Competition and Consumer Commission, on how it proposes to separate its businesses.

   The new fibre-to-the-home network announced in April would bypass Telstra's copper wire system and make it redundant.

   Telstra chief executive David Thodey described the ultimatum as 'disappointing.'

   'It's Telstra's view that many aspects of this package are unnecessary and need never be implemented if a mutually acceptable outcome can be reached on the national broadband network,' Thodey said in a statement. 'Telstra supports the government's NBN vision. We are willing to discuss options around separation.'

   Opposition Liberal Party communications spokesman Nick Minchin condemned the plan to force a split.

   'The government says they would prefer Telstra to approach this on a voluntary and cooperative basis but then holds a huge gun at Telstra's head, saying you can't have any spectrum unless you break up the company,' he said.

   'It's never been Labor policy until apparently today to force the breakup of Telstra, and the government hasn't given any adequate explanation as to why that is necessary,' he said.