Some advice for the “new” Telstra

Bleeding Edge wasn’t invited to the farewell party for Sol Trujillo, if indeed there was a farewell party for Telstra’s departing chief executive, as he slipped out the back door six weeks ahead of schedule.
Former chairman, Donald McGaughie also left without a peep, which seemed fitting, given that he and Trujillo seemed to have been cloned from the same combative, boastful, take-no-prisoners material. That was scarcely surprising. Four years ago McGaughie had popped a little clause into Trujillo’s employment contract which declared that a critical element in the CEO’s performance review would be “a “close and constructive” relationship with his chairman.
We were probably spared a heated confrontation with both, what with our continued criticism of Telstra in general, and its strategies in particular.
What we did miss, however, was the opportunity to talk with the new chairman and CEO, David Thodey, and pass on some advice. We’re sure they would have been eager to receive it, as they takes charge of a corporation that has been acting increasingly like an out-of-control gorilla.


The first thing we would have told themwas that they should dump several other members of a board which has failed manifestly in the past five years to do anything to rein in Trujillo’s and McGaughie’s increasingly arrogant conduct.
They should replace them with some young, alert individuals – people who don’t believe that yesterday’s ideas will be relevant to tomorrow’s, or for that matter today’s marketplace.
The board needs some conciliators too. The new CEO, David Thodey, seems to be the right man to repair the shattered relationship with the Federal Government. The failed brinkmanship of his predecessor has led to the prospect of having Telstra’s local loop become virtually worthless within a few years; being forced into structural separation and stripped of much of its competitive advantage.
But that’s only one area where the Telstra culture has to be re-shaped. Under Trujillo and McGaughie, Telstra seems to have taken on more wars than former US Defence Secretary Donald Rumsfeld, with similar consequences. It’s been fighting with handset manufacturers like Nokia and anyone else it perceives as a threat to its monopoly profits. Those relationships are going to have to be repaired.
It has to stop the blatant exploitation of its customers and the systemic over-pricing and under-performing which has driven its reputation on increasingly influential sites like Whirlpool ever lower.
Trujillo came to the job with much fanfare about being customer-focused, but it quickly emerged that he was not so much interested in pleasing customers as in extracting as much money from them as possible.
The only metric that mattered for Telstra was ARPU (Average Revenue Per User). That is an understandable and sensible focus for any telco, but Trujillo’s tactics for driving it higher were completely unrealistic.
With more Australians reporting that their own and their children’s technology consumption had become a burden on the household budget and with small to medium enterprises joining smarter corporations in seeking cheaper alternatives like VoIP services on both wired and mobile networks, Trujillo nonetheless kept promoting costly “one-click” services and ever-faster data speeds on the Next G mobile network. The fact that the money – a lot of money – kept rolling into his pocket from a company that had seemingly lost contact with the reality of adequate executive remuneration, was possibly the reason he failed to appreciate that in the real world, practically nobody could afford to use the bandwidth on what we took to calling the bankruptcy network.
While Trujillo and his defenders still point to Next G as the benchmark of the man’s success, independent telecoms analyst Paul Budde says it was never likely to generate the increased average revenue per user to justify the significant additional costs to the carrier.
“You have to ask why other national carriers didn’t rush in and do what Telstra did?” says Budde. “They did the same numbers as Trujillo, but they couldn’t see a business model that would support the investment.”
Like Bleeding Edge, Budde believes Telstra is going to have to demonstrate uncharacteristic humility if it is to start repairing relationships. “None of us wants to write Telstra off the map. They are too important to the country, if they take the right attitude. I’d like to say to them that we would like to help, but they can’t be helped if they can’t admit that everything wasn’t as wonderful over the past four years as they have claimed.”
And he says that Thodey’s toughest job might be to change the culture of what has become a vertically-integrated monolith. “Sol Trujillo was the sort of person who bullied and abused people, and that was communicated throughout the company. You won’t be able to change that overnight.”
It’s been a long time since Bleeding Edge was invited to anything at Telstra. Perhaps, under the new regime, we might get back on the guest list.

Leave a Reply