Thursday, 26 September 2013

Ziggy Switkowsky: No Rocket Scientist

In the assessment yesterday of ABC business reporter, Peter Ryan:
In the world of telecommunications, it's hard to find a more experienced local operator than Ziggy Switkowski. 
The one time nuclear physicist is a former chief executive of Telstra and before that he ran Optus and the Australian operations of Kodak.
On paper, it's a formidable CV. But more importantly, his Liberal Party connections run deep. [emphasis added]
Malcolm Turnbull was quoted as saying:
He's obviously highly qualified and I think most people would think it would be, would regard him as an eminently suitable person. But no decision has been taken by a Coalition government because as, not least because we haven't even been sworn in yet. 
Is any of this true? I don't think the facts support the proposition that Switkowski is either competent or experienced enough to successfully lead NBN Co. He's failed twice in local Telcos.

Ziggy's Wikipedia page tells us he studied and researched Nuclear Physics until age 30, when he joined Kodak (Australia), working there for 18 years, rising to Managing Director and Chairman for 4 years, with a $3.5 million severance. The same Kodak that received a massive government bail-out and is now defunct.

Ziggy's time at Optus, replacing the foundation CEO, Bob Mansfield was brief, May 1996 to 13-Jun-1997. Hardly a CV enhancer and never cited by him, such as Suncorp or Bloomberg Businessweek.

Ziggy joined Bob Mansfield at Telstra in Sept 1997 as "Group Managing Director, Business & International until replacing Frank Blount as CEO in Mar 1999, contracted until Dec-2007. Mansfield was Telstra Chairman from 2000-2004.

Mansfield's qualifications for CEO of Optus, and presiding over the multi-billion debacle of the Cable TV/HFC rollout, started as CEO of MacDonalds and MD of Tyco investments After Optus, he went on to be CEO of Fairfax for a year. In 1997, he was given a senior political appointment by Prime Minister John Howard: 'major projects facilitator'.

The 1995-1997 HFC  rollout passed an estimated 2.5M premises, 80% duplicated and cost an estimated $6-$7 billion between Optus and Telstra. By 2000, over $4 billion was written off.

However, Ziggy stepped down three years early after very poor performance:

Dec. 1  2004 (Bloomberg) -- Ziggy Switkowski quit as chief executive of Telstra Corp., Australia's largest phone company, ending a five-year tenure where he presided over a 42 percent slide in the share price and more than A$2 billion ($1.5 billion) of losses from a failed expansion in Asia. 
The resignation of 56-year-old Switkowski comes seven months after Bob Mansfield quit as chairman, following the board's rejection of a plan by the pair to bid A$3.5 billion for John Fairfax Holdings Ltd., the nation's second-biggest newspaper publisher. Switkowski will leave by July 1, Telstra said in a statement.

Switkowski, who spent more than $5 billion on acquisitions as chief executive, according to data compiled by Bloomberg, abandoned the expansion strategy in June in favor of returning A$4.5 billion to shareholders through buybacks and increased dividends during the next three years. 
Switkowski led Telstra's expansion into Asia, which was marred by more than A$2 billion in losses. The company last year wrote off its investment in Reach Ltd., an undersea cable venture with Hong Kong-based PCCW Ltd., which was once valued at A$965 million. 
He had staked his job on achieving at least 4 percent growth in domestic sales, the industry average, by 2006. Domestic sales rose just 1.7 percent to A$19.3 billion in the fiscal year ended June 30. 
The former government monopoly's share of the telecommunications market fell to 60 percent from 75 percent under Switkowski, according to independent industry researcher Paul Budde Communication Pty Ltd.
 Ziggy successor at Telstra, Sol Trujillo, in 2005, just 6 weeks after assuming control, gave a very frank presentation on the parlous state of the business and it's bleak commercial outlook. Without direct criticism of the previous management, Trujillo made it very plain they had performed very badly: 13 of the first 15 slides detailed the problems, describing it as a "meltdown" and adding there had been at least $2 billion of under-investment in the network, both Capital and Operational expenditure. [slides 8 & 14].

Trujillo's pitch at the time, guaranteed to address the business's problems, was a $4.7 billion injection of government money into a National Broadband Network, with Telstra fully in control. The Howard government had the chance to change history, fix the Telecommunications market and structurally separate Telstra and forcefully rejected it.

Trujillo was forced into an ambitious and extensive modernisation programme of all aspects of Telstra's business. Not unsurprisingly, Trujillo and his team failed to meet all their goals and created a lot of criticism, including mine. Perhaps Trujillo did very well as an import 'parachuted' into a highly dysfunctional and internally riven organisation. He certainly set the business up for David Thodey and the doubling of the share price since the NBN agreements were signed.

The Communications Workers Union has a unique take on the business and people of the time, including some comments on the internal factions within Telstra management and their view of the Howard agenda.

One time Liberal Communications Minister, Richard Alston, weighed into the NBN debate in early 2009, but interestingly describes the massive failure in the Telecommunications market on his watch:
So when in 1994, in partnership with leading US cable operator Continental Cablevision, Optus unveiled a brand new $4 billion hybrid fibre coaxial cable network to take on the slumbering giant, there was cause for serious optimism. 
But Telstra quickly adopted a classic defensive strategy and built a parallel network, which almost bankrupted the new entrant. This experience undoubtedly had a searing demonstration effect, sufficient to deter other international challengers and since the tech wreck of April 2000 there has been a dearth of any serious direct facilities-based competition, despite a fundamentally new regulatory regime introduced in 1997 with the support of both main parties.

Switkowsky didn't just get turfed out of one Telco for over-promising and under-delivering, but two, Optus and Telstra.

He was unqualified to run Telstra and inexperienced in Telecommunications in 1999. Nothing has changed since 2004. It took a real Telco exec, Sol Trujillo (cf Maltby & Quigley), to understand the problems and solutions and start to execute on them - starting with standing up to the bully boys in the Howard Government.

Bob Mansfield, his mentor and ally, also has demonstrated poor commercial judgement running two Telcos, but his career path under the Liberals shows that who you know and what you believe are far more important than

And what of Ziggy's judgement in his own field, Nuclear Science? In 2011 he was telling us that the threat of meltdown at Fukushima was only minor and more nuclear reactors should be built.

The Japanese government has just shutdown the last nuclear reactor in Japan, despite their reliance on them, domestically and industrially, for electricity. Groundwater contamination and pollution of the sea are still unresolved problems for Tepco, the owner/operator of the triple meltdown at Fukushima.

Switkowsky's unbridled enthusiasm and naive optimism on Nuclear power in the face of overwhelming contrary evidence seems to me to provide more evidence of poor judgement and a lack of critical analytical abilities.

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