Departing AAPT boss takes a swipe at Telstra

Jon Stretch, who yesterday lost his job as head of Telecom's Australian unit AAPT, delivered a couple of parting shots at rival Telstra and the Australian telecoms environment.

His comments echoed complaints here about the incumbent, Telecom, and lack of take-up of broadband.

"In Australia, we don't have a very healthy industry," Mr Stretch told The Australian newspaper.

"It is not an industry that rewards innovation."

He said the decision by Telstra last year to hike wholesale prices had long-term ramifications for the industry, which he was quitting after an eight-year stint.

"Our broadband wholesale prices are going up 6-7 per cent in real terms while retail prices are falling by up to 20 per cent."

Two weeks ago Telstra introduced a new entry price for broadband of A$14.99 ($16.95) a month. The Australian Competition and Consumer Commission is investigating the move as being potentially anti-competitive -- the second such probe now under way into Telstra.

Telecom this month announced it was cutting its broadband internet prices here and offering faster download speeds with a new entry level plan priced from $29.95 a month.

Telecom chief executive Theresa Gattung last week said its broadband prices were internationally competitive but Prime Minister Helen Clark warned she was still unhappy about the price and hinted at the need for regulation.

Mr Stretch said: "I don't know how long (Telstra chief) Sol (Trujillo) thinks he can keep thumbing his nose at the Government so aggressively before they take him down."

He will depart next week as a result of the restructuring.

Analysts said Telecom's announcement yesterday to restructure its Australian operations into managed and mass divisions appeared to make it inevitable AAPT would be sold or merged. Telecom is expected to shortly announce a formal review of its ownership of AAPT.

Deutsche Bank analyst Richard Long said the announcement set the scene for the long-awaited sale or merger of AAPT.

"Reading between the lines, assuming the sale is still on, it looks like this is a prelude to a break up as part of that sale process."

"This seems to add a level of complexity and cost that you don't necessarily want to have, unless of course it is part of a break-it-up-type sale process."

The appointment of New Zealand-based Marko Bogoievski as head of the mass market division indicated a caretaker roll, Mr Long said.

AAPT would have "no reason" to keep its consumer division, he said.

Telecom could own 40 per cent of a merged business, with Singtel's Optus the likely buyer.

Telecom has written down AAPT's value from A$2.3 billion in 1999 to A$628 million but Telecommunications analyst Paul Budde said its real value was about half that.

"The whole situation becomes a fire sale, and with a fire sale you always have vultures circling around."

It was strange to announce the chief executive would be leaving while the sale process was taking place, he said.

"Today's news clearly indicates that Telecom is rapidly exiting AAPT now, and obviously it has indicated that the sale process is in full swing and they don't need to the current CEO any more to do the hand over."

Mr Budde said Telecom never seriously looked at the future of AAPT and it never really looked at investing in broadband.

"That has created this massive problem."

- NZPA