Paul Brislen: Telstra chief's exit hints at change

One certainty about the shakeup at Telstra: chief executive Ziggy Switkowski's replacement will take a long, hard look at the future and the operations of the telco's New Zealand subsidiary.

One focus must be whether to put in the cash to build a cellphone network.

TelstraClear says there's nothing to worry about, it's business as usual, nothing to see here, move along.

But with Switkowski's resignation - announced on Wednesday - TelstraClear's plans for next year must be up in the air.

This year has not been kind to TelstraClear. Instead of rolling out all manner of services on Telecom's network as it expected, it was forced to switch to Plan B after the Commerce Commission decision not to open Telecom's network to competitors.

Instead the Government accepted the commission's recommendation to introduce a wholesale model, although even that is now under pressure after the announcement of a commission investigation into Telecom's business practices regarding the wholesale regime.

TelstraClear has kept busy pushing out new residential plans and quietly going about its business in the mobile space.

But as Vodafone and Telecom roll out new networks, it is faced with either continuing to resell Vodafone's service or building its own network - and it's apparently chosen to do the latter.

Although nobody will confirm anything yet, the industry is abuzz with the idea that TelstraClear has appointed Ericsson to build its network and will begin rolling it out as soon as the Telstra board approves.

That's quite possibly on hold for now while the board seeks to replace Switkowski, and in the mobile game time is money. A six-month delay could well scupper the plan entirely.

Publicly, the Telstra board continues to express confidence in Switkowski and his expansion plans.

But Switkowski's planned expansion into Asia has been a disaster - Telstra has written off A$2 billion ($2.16 billion) in investment.

His foray into New Zealand hardly set the industry alight either. This year, TelstraClear posted its first profit, $2.7 million on revenue of $692 million - quite welcome after last year's net loss of $157 million.

But TelstraClear still has a relatively small market share. Even though it's No 2 in the market, Telecom continues to dominate, regulatory relief notwithstanding.

Will Telstra stay in New Zealand? I guess that's the real question here - will the new CEO pull out and sell TelstraClear off? I don't think he or she can or will.

Even if the Asian adventure is written off as a bad deal, any new CEO will have to consider two things - Telecom and the Australian Government.

Telecom owns the No 3 Australian telco, AAPT, and despite its own mini-version of Telstra's overseas woes, the company is starting to gather momentum.

Telstra needs to have a toe-hold in the New Zealand market if only to balance Telecom's push into its home market. Step out of line, Telstra is saying, and we'll pour money into TelstraClear and take you on at home.

The Australian Government is about to sell off its tranche of shares. Any new CEO will be charged with making Telstra look as profitable as possible ready for the sale.

Whether that includes a New Zealand subsidiary - plus a new cellphone network - remains to be seen.