The Guardian 23 November, 2005

Telstra sackings:
profits rule, not public service


Peter Mac

Telstra’s new plan to sack a quarter of its workforce is a direct outcome of the privatisation of the organisation. Telstra’s chief executive, Sol Trojillo, has stated that he wants to sack 12,000 employees over five years as part of plans to move into new areas of technology.


The announcement was greeted with anger by Telstra staff and unions. Stephen Jones, Assistant National Secretary of the Community and Public Service Union, described it as "an outrageous act of vandalism". With gross arrogance and insensitivity, PM Howard defended the plan on the grounds that there was a strong economy and staff would get re-­employed elsewhere!

The unions suspect that redundancies will take place after enactment of the industrial reform laws, which would make it illegal for employees to take industrial action under current enterprise agreements.

Moreover, Telstra may outsource part of its operations overseas and attempt to reduce redundancy payouts. The entitlements of individual contract staff are determined by Telstra’s redundancy policy, which can be changed overnight.

(Corporate policies are worthless assurances. Media monster Rupert Murdoch recently protected his company, News Limited, from takeover but, in doing so, downgraded the value of shares, contrary to former statements. Accused of having betrayed shareholders, Murdoch replied that the company hadn’t broken a promise, it had only changed its policy!)

Colin Cooper, President of the Communications Division of the Communications, Electrical and Plumbing Union, commented bitterly that Telstra needed more staff, not fewer, to meet the demands for its services. However, even though the public is still the biggest stakeholder in the organisation, Telstra’s managers are now absolutely intent on maximising profits, not on providing any service to the public unless it brings in big bucks. And the government, the majority shareholder, has no intention of stopping them.

Trujillo and his predominantly US executives want to maximise Telstra’s profitability by the end of 2006, the anticipated target date for full privatisation of the organisation.

To achieve this they’d like to move out of areas of declining profits, such as fixed telephone services (the copper cable "local loop") into areas of greatest anticipated profit (including the 3G and "fibre to the node" networks).

They are not interested in providing services at current rates to rural Australia, which were achieved by cross-subsidisation with surpluses from other services and long-term taxpayer investment for the benefit of the nation, not corporations.

In order to maximise assets prior to full privatisation, Telstra’s bosses have cut investor dividends in the short term, intending to plough back any capital into areas of maximum profit potential. To the rage of Telstra’s competitors (who are demanding access to the Telstra "loop") the government has also ploughed in huge funds for investment in these areas.

This is excellent news for would-be corporate purchasers of Telstra’s last publicly-owned component. Last week, failure to receive dividends prompted many Telstra shareholders (particularly "Mum and Dad" investors) to sell their holdings, driving down the share price.

If this trend persists, corporate investors could purchase much of the rest of Telstra at a bargain basement price, with the potential for rapid and huge profits in areas of new technology.

Ironically, however, the actions of Telstra’s management team are in some respects at odds with government policy. In order to gain public acceptance for the Telstra sell-off, the government wants both rural and city communities to feel that their telecommunications service is entirely adequate for their needs, and that after privatisation the government would force communications firms to maintain a similar standard of service. (The government has never explained how they would enforce this policy, which would in any case be dropped as soon as possible after privatisation.)

Moreover, in recent years the government has clearly failed to maintain an adequate service to many rural areas. CDMA, the dedicated rural mobile network, has severe limitations in coverage.

However, rather than extend the service, Telstra has now indicated that they’ll replace it with a new national 3G system. National Party MPs have angrily criticised the shockingly wasteful move, which would allow Telstra to focus on profitable city-based services, leaving rural subscribers out in the cold.

Telstra management has openly condemned "government regulation", i.e. community obligations such as requirements to provide a universally accessible service to the public. They have particularly indicated that they do not see traditional fixed phones as an area of future growth for them, compared to the new 3G mobile service. Carried to its logical conclusion, this could see Telstra abandoning fixed phone services or at least minimising their involvement, leaving city subscribers with gaping holes in their phone service, just like their country cousins.

If the government were sincere about its commitment to have services to all Australians maintained, the irrepressible greed of the Telstra moguls would be endangering its plans to fully privatise the organisation. The Telstra sackings are evidence of the real motivation of Telstra’s bosses. They also demonstrate the absolute corporate cynicism dominating both Telstra and the Howard Government.

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