Time running out for chief at embattled TelstraClear

By PETER GRIFFIN and PAUL BRISLEN

On June 11 a devastating email was sent out across the TelstraClear corporate network.

A respected and normally restrained Christchurch-based business manager, Dale Roche, had just found out that TelstraClear had lost a $30 million contract to service the Department of Corrections.

For Roche, frustrated by months of what he saw as weak support from head office, it was the final straw.

"I have had enough of apologising to customers for the grief we cause them with the incompetent fault resolution and missed install dates, to name just a couple of issues," he said in the email.

"It's difficult to live a lie and pretend all is fine when the opposite is true. When do we start to learn from our mistakes?"

He signed off by saying he was resigning.

The email, which was soon doing the rounds of gloating Telecom executives, was an unusually public outburst in a competitive yet reserved industry.

It garnered at least one equally public response, from Dave Ireton, a colleague of Roche's, who has also since departed TelstraClear.

"On behalf of all of us in sales around the country who have suffered in silence and haven't had the courage to speak out for fear of retribution, I say thank you."

For TelstraClear boss Rosemary Howard it was her worst nightmare. She had invested up to $2 million to win a deal which could have encouraged other Government departments to follow suit. Now she was left with nothing and staff morale was hitting rock-bottom.

It would be easy to pass off the email as simply the rantings of disgruntled former employees. But Herald inquiries suggest it represents a long-standing and deep vein of frustration.

Howard, sipping peppermint tea in TelstraClear's modern boardroom on Auckland's North Shore, dismisses Ireton and Roche as a disgruntled minority.

Nevertheless, the email came after a year of disasters for the telecoms company. The Commerce Commission had decided not to open to competition Telecom's local loop - the copper wires connecting homes and businesses to local exchanges.

As Roche and Ireton disclosed, TelstraClear was facing customer disquiet.

Its plans to roll out a suite of next-generation "Broadsoft" telephone services that would have given it the edge over Telecom had run into a brick wall. And only last week, the company suffered a major network outage that disrupted customers.

Its mobile plans look like "vapourware". TelstraClear makes promises, but takes no action and is locked into a mobile resale deal with Vodafone that gives low underlying profits.

Telecom, taking full advantage of TelstraClear's problems, is enjoying a renaissance.

Apart from winning back the Department of Corrections, it has also picked up several other lucrative Government contracts. It also outbid Telstra for the highly-respected IT services company Gen-i.

Vodafone is also surging ahead, investing $400 million upgrading its mobile network.

TelstraClear's growth has been slower than expected, up just 1 per cent in three years to 12 per cent.

Observers say Howard pinned too much on the Commerce Commission opening up Telecom's network to competition.

Its lack of action in mobile showed its reluctance to commit to the market unless it was able to offer a full suite of services - telephone, internet, mobile and business telecoms.

Worse still, Howard, who took the helm when TelstraSaturn merged with Clear in 2001, had not even planned for the Corrections loss, the worst of all scenarios.

Many are now asking whether she will ever deliver on the promises she made in 2001.

Former TelstraClear staff, who are now spread throughout the telecoms industry, say the failed Department of Corrections deal was a good example of the company's tendency to over-promise and under-deliver.

Roche's email criticises the head of business sales, Sunil Joshi.

A former IBM salesman based in Sydney, Joshi has steered business sales at TelstraClear for about a year, gaining a reputation as a tough taskmaster.

"It took me a while to stop jumping when the phone rang," says one former salesman.

Others point to failings in the post-merger systems of TelstraClear as being at the heart of the company's problems. Niggling issues with billing, customer service and technology persist, say ex-staff.

"It was like death by a thousand cuts to people in the sales force," said one former staff member.

Vendor equipment problems are also the stated reason for the continued delays in the release of the "Broadsoft" package of internet protocol-based phone services. Howard admits it will be months before this package is released.

She concedes TelstraClear agreed to tight deadlines for implementing the Corrections system and later found it could not meet the deadlines.

"We committed to do something too quickly," she says. "We probably shouldn't have tried to win [Corrections] in the first place."

She defends Joshi, saying he is a pivotal member of the sales team. And overall, she defends TelstraClear's internet protocol network, which serves around 100 large customers.

Her "Plan B" is to rely on the regulator forcing Telecom to offer wholesale services and gradually expanding TelstraClear's network.

"We want to invest more, not less, but the speed at which we can do that depends on how quickly the market is opened up," Howard says.

She rules out wireless technologies to overcome Telecom's monopoly as they are unreliable. She also says TelstraClear will not build a parallel network.

"No country anywhere in the world has seen a new company overbuild an incumbent's network. Nowhere. We're not about to do that here," she says.

TelstraClear will finally be able to sell home phone users a complete package for line rental, tolls and internet services and to differentiate from Telecom's offerings, she says. (She concedes reselling will never be lucrative.)

She may well be right.

After bleeding red ink for years, including a loss in the year to June 2003 of $157 million on sales of $651 million, she expects TelstraClear to start paying its way soon. It is due to release results in the next few weeks.

Howard, who originally joined the Aussie telco giant in 1992, has her supporters.

Respected telecoms analyst Paul Budde describes her as "one of the most astute businesswomen in Australia today". He said New Zealand "couldn't have a better challenger and competitor chief executive than [Howard]."

Howard plans to be with TelstraClear for the long haul.

A former TelstraClear mobile specialist said she was a strong leader trying to steer a dysfunctional organisation with a high turnover of personnel.

"It's like a government being voted in when the economy is bad. You get blamed for everything."

Her fate may ultimately rest with the career of embattled Telstra chief executive Ziggy Switkowski.

Switkowski, who has nurtured Howard throughout her career, has faced calls to resign since he supported a discredited deal to merge Telstra with publishing giant Fairfax.

These calls appear to have tapered off, at least for the moment, ensuring Howard's future at the company.

"He can't be seen to be throwing good money after bad," says a TelstraClear insider.

"That would signal to shareholders that his overseas strategy has failed. But he can't be seen to be cutting his management team in New Zealand for the same reason."

For her part, Howard says she is determined to succeed.

"Some of it might have been a bit harder and slower than we would have liked. But I've still got some more things I need to do," she says.

"It's not over. We're going to keep going until we've got a marketplace in which we've got choice and competition."