Saturday, 6 October 2012

TLS: Sol Trujillo's Telstra legacy

Two views of the same events, how Telstra performed under Sol Trujillo and the three friends he brought with him: Greg Winn, Bill Stewart and Phil Burgess.

Sol's own biography describes his triumph at Telstra (ASX:TLS):
Sol served most recently as CEO of Telstra Corporation, Australia’s largest media-communications enterprise, where he completed the privatization of a previously government-owned monopoly and led the transformation of a traditional telecommunications utility into an integrated media-communications company – including telephone, CATV, wireless, directories, advertising, online trading, and the world’s largest, fastest, and most advanced mobile internet.
And summarises his achievements at Telstra as:
  • Privatized a previously government-owned telecommunications ultility.
  • Built an integrated media-communications company with CATV, Internet, directories, phone, and satellite.
  • Built the world’s largest, fastest, most advanced mobile Internet – a high-speed wireless 3G network.
  • Achieved highest user and revenue growth in the industry.
  • Grew average revenue per user (ARPU) by approximately 15 percent and data ARPU by more than 200 percent.
  • Created Hong Kong’s largest mobile business.
  • Changed the company’s focus from products to the customer experience.
Sol's wikipedia entry reports his time at Telstra as:
He was appointed Telstra's chief executive officer on July 1, 2005.

During the period of Trujillo's tenure, Telstra's share price underperformed the market by around twenty percent, losing over $25 billion in value while customer complaints rose 300 percent.

Major factors in the company's share price decline were the global financial crisis of 2008–2009 and being disqualified for submitting a non-compliant bid to the National Broadband Network tender issued by the Rudd Government.

On February 25, 2009, Trujillo announced he would stand down as Telstra's CEO on June 30, and return to the United States with his family. On May 19, 2009, Trujillo left Telstra and shortly after returned to the US.
'Crikey' described Sol's legacy as 'a shambles' as ambitious projects didn't deliver promised benefits, revenues fell short of projections and Telstra acquired a reputation for abysmal customer-service:
Exactly why Trujillo was paid so much to deliver so little remains a mystery to all except the Telstra Remuneration Committee. Trujillo was already a very rich man before arriving in Australia, having been paid a US$72 million golden handshake by US West after leading the company into an ill-fated merger with Qwest.

It isn’t only be Telstra shareholders who have rights to be aggrieved at Trujillo’s remuneration. Former CEO, Ziggy Switkowski who presided over a company which made similar profits and employed far more people than Trujillo’s Telstra was paid only $1.65 million in 2000, rising to $6.3 million in 2005 (which included a $2 million termination payment). Trujillo’s local replacement, David Thodey, is receiving fixed remuneration of $2 million, 33% less than Trujillo’s base pay.

Hiring expensive, celebrity CEOs never seems to deliver solid returns for shareholders. It’s a shame no one told the Telstra board in 2005.
How the Stock Market valued Telstra:

Sol doesn't mention the share price collapsing under his reign and  that slide continuing to nearly half his starting price ($2.60). Signing the NBN agreements has consolidated a share price recovery this year.
  • 28-Nov-1997: $3.50 [$3.30 issue price for 'T1']
  • 01-Oct-1999: $8.00 [$7.40 issue price for 'T2']
  • 17-Nov-2006: $3.75 [$3.60 issue price for 'T3']
  • 01-Feb-1999: $9.15 [peak]
  • 07-May-1999: $7.36 [low for 1999]
  • 20-Jul-1999: $8.95 [peak]
  • 31-Dec-1997: $4.11
  • 31-Dec-1998: $7.63
  • 31-Dec-1999: $8.28
  • 05-Jan-2000: $8.00
  • 01-Jan-2001: $6.73
  • 07-Jan-2002: $5.52
  • 01-Jan-2003: $4.41
  • 05-Jan-2004: $4.84
  • 03-Jan-2005: $4.91
  • 04-Jan-2006: $4.06
  • 02-Jan-2007: $4.12
  • 03-Jan-2008: $4.71
  • 05-Jan-2009: $3.70
  • 04-Jan-2010: $3.45
  • 05-Jan-2011: $2.79
  • 16-Mar-2011: $2.60 [low]
  • 02-Jan-2012: $3.33
  • 03-Aug-2012, $4.02 [peak in 2012]
  • 05-Oct-2012: $3.95 [last close]
  • 01-Jul-2005: $5.02 [Trujillo becomes CEO]
  • 26-Jun-2009: $3.82 [Trujillo leaves]
  • 28-Feb-2012: $3.26 [ACCC approves Structural Separation Understanding]
  • 07-Mar-2012: $3.23 [Definitive Agreements in force]

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