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Net industry backs Telstra split

SECTIONS of WA’s Internet industry have backed a proposal to split Telstra into separate wholesale and retail companies.

Last week the Australian Labor Party released a discussion paper that canvassed a number of options for Telstra’s continued future as a joint

public and government-owned company.

One of those options was to completely separate the company’s wholesale and retail operations. The government could retain ownership of the wholesale division, which would own all infrastructure, and private investors could own the retail arm of the company.

While Federal ministers, some economic commentators and Telstra itself have criticised the idea, others see many benefits in the concept of separation – in particular, an increase in competition among Internet service providers.

Kim Heitman, the treasurer of the WA Internet Association and a director of Adultshop.com, said a proposition like the ALP’s was quite plausible.

He said such a scheme had worked previously, when the wholesale and retail divisions of Telecom and OTC were separate and each was obliged to deal with the other on an arm’s length basis.

“For a very long time the industry has been saying this is the only sane way of running the telecommunications system,” Mr Heitman said.

“We’ve now got the situation where there is no doubt Telstra wholesale subsidises Telstra retail, and the costing plan is designed to make sure that no other Internet provider is ever going to be in such a favourable position as Telstra BigPond.”

Another industry leader, who asked to not be named, said the suggestion to split Telstra had a lot of merit and would lead to greater competition among Internet carriers. One negative aspect of the plan, however, was that the government would be bound to maintain and improve Telstra’s infrastructure without the support of high retail earnings.

The source said that in many ways there was still just token competition among carriers, and he dismissed concerns that existing or future private shareholders would lose out were Telstra to be split.

“I think we should be looking at it (in terms of) the value to the nation for growth. There is no doubt that telecommunications and telecommunication-related services is a major part of the growth future for this country, and for that to be in the hands of one organisation at the level that it is, and for the future of that to be in the hands of an organisation that is acting in its own corporate interests as opposed to the interests of Australia as a whole, is dangerous,” the source said.

“It’s too important to treat the telecommunications infra-structure in Australia as a corporate asset of Telstra, to be looked after only in the interests of Telstra shareholders. It should be in the interest of Australian citizens.”

Mr Heitman said the influence of non-government shareholders would be a difficult issue to overcome, as would Telstra’s self-interest in effectively remaining as a monopoly.

“The ALP might have to climb down on its plan because of all the mum and dad shareholders, but if we’re talking economic rationalism, it (structural separation) is the only thing to do with Telstra,” he said.

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Total Shareholder Return as at 30/06/16

1 year TSR5 year TSR
365thLendlease17%20%
483rdWestpac-2%13%
497thTelstra-4%21%
526thQantas-9%19%
722 WA (and selected non WA) listed companies ranked by 1 year TSR relative to other companies with similar revenue
Source: Morningstar

Revenue

6th-Telstra$26,607.0m
7th↑Westpac$21,642.0m
9th-Qantas$16,200.0m
10th-Lendlease$15,350.3m
77 listed non wa companies ranked by revenue.
Source: Morningstar

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