Telecom, Telstra hailed at talkfest

By PETER GRIFFIN

An industry talkfest in the US about the telecommunications sector has cast up Telecom and Telstra as hot picks among the global investment community.

Investment bank Salomon Smith Barney held its annual entertainment, media and telecommunications conference in California last month, and while the mood was generally grim among participating telcos, the local incumbents were picked as relatively good performers.

Trevor Rowe, the chairman of Salomon Smith Barney Australia and New Zealand, said Telecom's performance over the past few years, compared with the All Ordinaries Index and the Standard & Poor's 500 Integrated Telco Index, was impressive in such a depressed market.

Rowe said the conference had a conservative air, with telcos producing little in the way of new products and services, instead concentrating on improving cashflows, cutting costs and reducing debt.

Telecom and Telstra were also held up as successful examples of bundling services - combining phone, internet and cellphone access on the one bill.

A report on the conference says US operators "are clearly lagging Telstra and Telecom in terms of both bundling and integrated billing. The idiosyncrasies of the US market mean that US operators can only now begin to bundle local, long-distance, wireless and DSL [high-speed internet] on the one package and bill."

Telstra claimed it had managed to reduce customer "churn" in half by bundling its products together.

But the conference also highlighted the fierce debate raging in the US on the issue of UNE-P (unbundled network elements platform), the system that allows long-distance telcos in the US to piggyback on the networks of the "Bell" regional telcos.

A Federal Communications Commission review due to be completed in the next few months may end such network leasing arrangements, giving more power back to the regional operators.

Such a move could even have implications for Australian telcos, said Salomon Smith Barney.

"The US approach may become a template for other regulators around the globe, which presents further potential downside for Australasian telcos."

Despite lingering scepticism over Telecom's ability to make its Australian business succeed, and its stake in the Hutchison 3G venture, Rowe said Telecom's outlook across the Tasman was viewed optimistically.