Tuesday, 6 August 2013

NBN: Pride in your work, Politics and Telstra

There's a personal dimension to my interest in Telstra and the NBN: my father worked his entire life for them, then invested in their shares only to lose a bunch of money.

My dad started work delivering telegrams. During WWII, age 21, he served in an elite, secret unit, Central Bureau, highly prized by the Allied Commander in the Pacific, whom said he "would not move without them". After the war, my dad worked for the PMG (& ABC) until retiring from Telstra. He went to war from a sense of Duty and to protect his nation from aggressors. He kept his war service secret for forty years because of his moral code. He'd put his life on the line for his country, and was prepared to do, to the utmost of his ability, what was asked of him. That same dedication and committment was transferred to the PMG.

He was proud of his war service, proud of his country and proud of the PMG/Telstra he'd helped create. The men who came back from the War were competent, focussed and knew what was important, and how to get things done. My dad's sense of duty, work ethic and pride in, and loyalty to, his country and employer were commonplace and this mindset helped created a world-class Network and Organisation.

These were capable, motivated men who didn't just follow orders nor take kindly to bureaucratic machinations and waste. The PMG was an exceptional organisation with a culture of high-quality and high-performance. My dad was very proud of Telstra and the part he'd played in it. It was natural for him to buy Telstra shares when they were offered. He would've been horrified to learn in 2001 that Telstra's business was starting to unravel and the owners knew it.

We all know that, as Richo said, "Politicians Lie".

We know politicians are people first and do make mistakes, do have to change their minds and will, at times, make "promises" they know they can't keep. That's the nature of the game of Politics.

This was how it was until John Howard came along with his "non core promises": We learnt that nothing "Honest John" said, especially in an election campaign, could be taken at face value.

It turns out that "Honest John" and his mates knew that Telstra was in trouble in 2001, had been advised by their own experts to structurally separate Telstra and that it would allow the business, as a listed company, to perform much better.

Later, in 2005, when a competent CEO came along, he presented Howard and his senior ministers with both a very clear picture of the problems with Telstra's business and what to do.

In 2005, it was still possible to separate Telstra into two business, wholesale and retail, just like Turnbull tells us New Zealand have done with "Telecom New Zealand" and "Chorus". Under this arrangement, Telstra in 2005 would've been able to deploy a 12Mbps Fibre to the Node Network without getting blocked by the ACCC.

My thesis is that Howard knowingly and against advice, both destroyed Shareholder value (T2: $7.40, T3: $3.60, just $0.30 more than T1, 9 years earlier, crashing to a low of $2.60 in early 2011) and created a "monster", in the words of Paul Fletcher, Liberal member for Bradfield.

Howard also created a Telecommunications market that failed, none of the commercial players were willing or able to create the necessary 21st Century infrastructure foreshadowed by Sol Trujillo in 2005, a National Broadband Network.

Instead of selling two vibrant businesses, both with high growth potential, in 2006 or 2007, Howard obstinately destroyed billions of dollars of "Mom & Pop" shareholder value. That included my fathers' superannuation investment.

Turnbull notes that only in Australia has the Government been obliged to step in itself and correct a complete failure of the Telecoms market in supplying universal Broadband.

Instead of acknowledging the Liberals own part in creating this almighty mess and applauding efforts to address the problems, Turnbull has put up an unbelievable plan that can only make a humungous loss and attacks anyone who dares not applaud him.

Think there's not more to come? A senior Turnbull staffer willingly acknowledges that they'll "greatly modify" their NBN plan after the election.

This is far beyond mere hard-line ideology. Something much deeper and destructive is going on that is not just taxpayer money being squandered, but investors are blind-sided and treated with callous disregard and indifference.

But this Political Party, even exactly these same politicians, have done exactly this before, not just burning investors with T2/T3 in an foreseeable and avoidable financial disaster.

Remember the "IT Outsourcing" of 1997 that was going to fix the Federal Budget? It was another massive Financial Disaster and every working person affected rues the day it was introduced.

John Fahey oversaw that monumental piece of idiocy. Just who benefited and by how much has never been put on public record. One thing is very clear, when the independent Auditor General came to review the programme, they could find no cost savings and noted it was very badly executed. News stories from the time (7:30, AM) tell a damming tale.

This demonstrated injudicious, profligate waste of Public Money, lack of all Financial Management skills and inability to "execute" by the Liberals, is ironically what they accuse their opponents of.

These are the same people that elevated Political Lying to the Art-form it currently is, with "That's a non-core promise".

We know "Politicians Lie", but the Liberals under Abbott take this to a whole new level past "Honest John" having embraced double-speak, when what's spoken means its opposite.

The Liberals would have us believe they are sound, competent Financial Managers, when nothing could be farther from the truth.

They'd like us to believe they have our interests at heart, when they've demonstrated exactly the opposite with supremely cynical acts like the Telstra T3 sale without structural separation.

They'd like us to believe they have an implementable NBN Plan, when it's an unmitigated Financial Disaster, it's designed to first make massive losses, then to be thrown away.

The Liberals, including their NBN Plan architect, Turnbull, intend to directly destroy around $21 Billion (75% of the Fibre Budget) and ultimately $30 - $40 billion invested in NBN Co when accumulated losses force it into bankruptcy.

NBN Co's largest creditor will be Telstra, who'll get the company for zero payment. This won't be a 'sale', the ACCC may have no power to prevent it.

There are two things we know about the Turnbull Node Plan:
  • Whatever they've written in their NBN Plan is pure fantasy and that won't be what they actually do, and
  • The Liberals still intend to "Destroy the NBN".
Who knows why Politicians do anything. The reasons behind this may one day come out, but I doubt it. In the meantime, the election looms and voters need to decide.


  1. Mine too. I worked for Telstra twice totalling 20 years +. Its was one of the best jobs I had and we did some amazing things. Many of the staff were good and went the extra mile

    I also invested some money in them and lost some of it on one of the T's

    I hope they do well out of the NBN. I still use Telstra a bit, but TPG for net and Optus for mobiles. The NBN is a great concept but I would be happy with 25-50mpbs on copper

    1. Greg,

      Thanks for the feedback.

      I haven't met one long-term PMG/Telstra employee that wasn't like my Dad and loved the company (not nec. the managers) and were proud of what they did, at least until privatised.

      Share price is over $5. good.
      Dividend today was 14cents, 28 cents/yr. For those who got in at $2.80, that's a great yield and brilliant capital growth.

      For the rest of us, not so good.

      Sorry that you lost money. That's crap.

      I agree that an interim copper solution is possible and could be economic.

      My economic analysis is that full Fibre makes more money for several reasons. Keeping the copper will be more expensive :(

      I've also suggested MDU's and Country Villages are easily deployed if you allow industry standard ethernet & locals do own install.
      Done some initial calcs on "Fibre to the Farm", leveraging the Rural Electricity Distribution Network. Should be under $10 billion, but that could be split 3-ways, Fed Gov, States and consumers (they get the benefit).

      Probably won't get any interest... But the most remote people get the most benefit and they'll never get Fibre unless it's done as a single, co-ordinated rollout.

      My rough calc is break-even period, saved fuel/time, for $7500 (full price) is 12 months or less. At $2500 would be months to pay for itself.


      All the best


Note: only a member of this blog may post a comment.