Telstra has Kiwi on the line

David Thodey spent 21 years at IBM - eventually as a general manager and chief executive - before joining TelstraClear in 2001.

By PAUL BRISLEN and BLOOMBERG

A New Zealander is tipped as one of the front-runners for the top job at Telstra, after yesterday's departure of chief executive Ziggy Switkowski.

David Thodey, chairman of local subsidiary TelstraClear, is considered one of the contenders for the job, along with fellow Telstra stalwarts David Moffatt, managing director for marketing and a former chief financial officer, and Bruce Akhurst, wholesale general manager.

Thodey has been with the Australian company since 2001. During that time he has served in some of the more volatile parts of the business, notably as head of the mobile division and now as chairman of the TelstraClear board. He has also run Telstra's retail shop chain and its national cellphone dealer network.

Prior to that he spent 21 years with IBM, culminating in the general manager and chief executive role for the Australia and New Zealand division.

Switkowski resigned 2 1/2 years before the end of his contract and has been unavailable for comment.

Telstra chairman Donald McGauchie said Switkowski had contracted a virus and was unable to attend either the board meeting where he resigned or the press conference that followed.

Switkowski's five-year tenure saw a 42 per cent slide in the share price and more than A$2 billion of losses from a failed expansion in Asia.

Telstra said Switkowski would leave next July 1, or earlier if a new chief executive was appointed. His resignation comes seven months after Bob Mansfield quit as chairman, after the board's rejection of a plan to bid A$3.5 billion for John Fairfax Holdings, Australia's second-biggest newspaper publisher.

Telstra's New Zealand subsidiary, TelstraClear, will carry on with "business as usual", a spokesman said.

"We're a separate company with a separate board."

TelstraClear has reported its first profit of $2.7 million on revenue of $692 million, reversing the previous year's net loss of $157 million.

The new Telstra chief executive will need to win back market share lost to Singapore Telecommunications and Vodafone.

The Australian Government, with a 51.8 per cent stake in Telstra valued at A$32 billion ($34.7 billion), also wants to restore investor confidence in the stock as it seeks to sell the shares.

"Under Ziggy's reign, the company hasn't performed to its best ability, hence his tenure was cut short," said Paul Xiradis, who oversees the equivalent of A$1.5 billion in investments as head of equities at Ausbil Dexia in Sydney.

"The board probably felt they needed some fresh blood to take Telstra to the market and ensure there's appetite for the stock."

Investors expect the Government to be able to overcome opposition to its plan to sell its remaining Telstra shares.

Treasurer Peter Costello said in October that the Government would not sell until the share price was about A$5. The stock has risen 6.3 per cent since then.

McGauchie said yesterday that the search for Switkowski's successor would start immediately.

Telstra said Switkowski would receive a payout of at least A$2 million plus an extra payment if he left before July 1.

Switkowski, who spent more than A$5 billion on acquisitions as chief executive, abandoned his expansion strategy in June in favour of returning A$4.5 billion to shareholders through buybacks and increased dividends during the next three years.

Last year, Telstra extended Switkowski's contract until December 2007.

He led the company's expansion into Asia, which was marred by more than A$2 billion in losses.

Switkowski had staked his job on achieving at least 4 per cent growth in domestic sales - the industry average - by 2006. But sales rose just 1.7 per cent in the year to June 30.

Telstra shares closed yesterday down 2Ac, at A$4.91.