Paul McIntyre: Telstra to unleash a broadband beast

Google schmoogle: Now famous words from Sol Trujillo, the American telecommunications evangelist responsible for A$22 billion ($23.45 billion) in revenues at Telstra and who spearheaded a marathon seven-hour briefing on Tuesday unveiling a breathtaking overhaul of the company.

Up to 12,000 jobs will go in the next five years - already 50,000 have been cut out of Telstra since 1996 - and the telco mothership will rapidly refocus on becoming a broadband network provider with all sorts of content flying across a new national high-speed voice, data and video network serving countless digital media screens and mobile devices.

Telstra will also tackle Google and online trading company eBay by morphing its advertising and directories division, Sensis, into a hybrid version of the two.

Serious customer service improvement was central to Trujillo's growth rhetoric, claiming Telstra would give customers a "powerful seamless user experience across all devices and all platforms in a one-click, one-touch, one-button, one-screen way."

Dozens of disparate IT networks would be buried and replaced by five high-powered computing systems powering a radically expanded database capability centralising and analysing customer behaviour and their likely needs.

Under the five-year makeover plan for Telstra, Australians will get fast movie and music downloads to their mobile phones and PCs, video calls - and they will be able to use their phones for tasks such as sending their shopping lists to online supermarkets.

The company also unveiled its first move into the film business by flagging a deal with Sony to offer 7000 movie titles from Sony's back catalogue which can be downloaded to computers from March.

"Let me say very clearly, very loudly and very succinctly, broadband is the key to the future of Telstra," Trujillo said. "This is the most ambitious transformation attempted anywhere in the world."

Ambitious indeed, although the market spooked, lopping nearly $3 billion off Telstra shares. Turnover in the stock was the highest in eight years as the market absorbed the cost of implementing the changes. Earnings will fall by up to 30 per cent - or more than A$1 billion - in the year to next June and a A$1.5 billion dividend was cancelled for 2006-2007.

By 2010 Telstra's revenue growth will be 2 per cent to 2.5 per cent a year, up from 1 per cent now, and new products will generate 20 per cent to 30 per cent of growth.

The company's two critical growth drivers will be directories business Sensis - a migration to the online White Pages and Yellow Pages is considered a huge opportunity, with Google-style search capabilities and eBay style trading - and broadband division BigPond.

BigPond is forecast to replace Telstra's fixed-line phone system as the single biggest contributor to revenue at 30 per cent.

"In the next five years, Sensis will double its revenue base to more than A$3 billion to become the leading one-stop shop for helping Australians to find, buy and sell," said Sensis chief executive Bruce Akhurst. Sensis was now attracting nearly 13 million net users a month and the 76 per cent of the population using the service today would grow to 90 per cent in five years.

"We are outgrowing Google in Australia," said Trujillo. "We are doing more, we are growing faster and we have more capability because we are more relevant in terms of how we think about growing our business here in Australia."

All of Trujillo's grand plans carried an ongoing caveat and message to the Government - too much regulation and Telstra will not be able to carry out its massive capital expenditure program to bring its infrastructure up to speed.

The federal Government is still looking at the end of next year to offload its remaining 51 per cent stake in Telstra and to that end, Prime Minister John Howard commented on the job cuts.

"The message to all of those people is that we have a very strong economy and the prospects of getting re-employment are greater now than they would have been 10 or 12 years ago when Telstra also had massive retrenchments when it was fully owned by the Government."

Telstra faces a tough journey but most analysts believe that if even half of Trujillo's bold claims are delivered, it will be a leaner, faster and more customer-focused beast.

* Paul McIntyre is a Sydney journalist