Telstra skills underlie merged firms' growth

By RICHARD BRADDELL

WELLINGTON - Although operating the most modern telecommunications network in the country, the new Telstra Saturn partnership will look to Telstra to provide staff to upgrade it.

The new company should become a legal reality following approval by the Telstra and Saturn parent Austar United boards, expected by the end of this week, which will merge Wellington cable TV and telephone company Saturn with Telstra New Zealand.

But chief executive Jack Matthews says that although Saturn's network may be only a year old, it will have to be quickly upgraded to internet protocol, the platform of choice for the convergence of voice, data and video.

He says Telstra Saturn hopes Telstra will be able to provide "someone who can lead us very, very rapidly from the circuit-switched analogue world into internet protocol."

Telstra Saturn became a reality a month ago with the completion of a detailed memorandum of understanding that merged Telstra's New Zealand assets, based largely on the corporate market, with Saturn's residential business.

By far the largest asset is Saturn's $250 million Wellington network, which is now nudging 30 per cent in market penetration of serviceable homes.

Although still small, the new company has ambitious expansion plans, aiming to spend a good part of a $1.2 billion budget in the next year on fibre-optic networks capable of streaming voice, video and data into homes and businesses in Auckland, Wellington and Christchurch.

Network construction has already begun in Christchurch, with the Auckland rollout still dependent on regulatory consents.

Mr Matthews says the merger announcement resulted in Saturn's best sales ever, with the take-up by wealthy customers - who had tended to be standoffish - soaring.

But that does not imply that Saturn is the junior part in the merger. Mr Matthews is emphatic that this is a partnership of equals.

As chief executive, he is adamant that he must be seen as independent of either shareholder, and so he will not have a seat on the board.

Telstra and Austar United will have equal representation on the board. But as yet its composition has not been revealed apart from former Telstra executive Lindsay Yelland, who will be chairman.

However, it seems that representation from the Telstra side will be high-powered and with strong technical expertise.

The even-handed approach is likely to apply to management. The Telstra side, servicing the business market, will continue as a separate operation under its own management, while Saturn also will have a new manager, drawn from its own ranks. They will operate under separate brands for the time being.

Management appointees have not been announced, but Telstra New Zealand's acting managing director, Rob Ellis, and Mr Matthews' right-hand man at Saturn, legal counsel Sean Wynne, are obvious contenders to head the two units.

Now into his fourth joint venture, Mr Matthews says he learned from bitter experience that it is essential to be even-handed in dealing with the two sides of a merger.

To that end, he will bring in another chief financial officer over the top of the two now in charge of Telstra New Zealand and Saturn, even though he has no complaints about either's performance.

One thing Mr Matthews is sure of is that after a short but detailed period of planning, implementation of the business plan will proceed rapidly - in weeks rather than months.

Most of the supplier relationships from the construction of the Wellington residential network are intact, allowing rollout in other centres to move ahead quickly.

And work is already under way on the submarine cable that will connect Auckland, Wellington, Christchurch and provincial centres between.

Clear Communications is pressing ahead with its plans to service business customers using LMDS, a broadband radio technology that bypasses Telecom's local network.

Copper-based ADSL, the high-speed product now offered by Telecom, will provide competition.

But Mr Matthews says it is expensive and, with standards now in place for cable modems, it is only a matter of time before the price of high bandwidth cable services will become comparable with dial-up links.

He sees Saturn's cheaper pay TV offering as preferable to all but the 25 per cent of the population who are diehard sport fans.