David Bradbury (Lindsay, Australian Labor Party) Share this | Hansard source

On the issue of shareholder value, I think it is worth noting the views of some market economists and some people who are better placed than many of us to assess what impact these arrangements might have on Telstra and its share price. On 17 September this year I saw in the Australian Financial Review:

Analysts at Macquarie Equities Research upgraded the stock to ‘outperform’ from ‘neutral’ while maintaining a $3.60 target price, saying the government’s regulatory reforms would allow for clarity and force a deadline by which a deal between the government and Telstra over the NBN would be reached.

‘Should Telstra reach a deal with the government, it may be able to recover significant value,’ said Macquarie analyst Andrew Levy in a note to clients.

That is a very good point. The difficulty and uncertainty surrounding the current regulatory arrangements have not been a positive for the share value of Telstra shareholders. The member for Mayo may wish to contest that point, but I would be very surprised if he were prepared to contend that these current regulatory arrangements are delivering the best outcomes for consumers and businesses. Frankly, they are not—and that is what is driving this reform. But I make that point in relation to shareholder value because that seems to be the one fig leaf behind which those on the other side are seeking some cover.

I also saw in the Financial Review of the same day a little piece entitled ‘What they said’. It is worth looking at. Goldman Sachs, which is a great authority in this place, particularly since the member for Wentworth joined us, said:

The announcement could mark the last of the adverse regulatory news flow for Telstra. While full resolution is unlikely until the end of the year, we are nearing greater certainty.

Obviously Goldman Sachs sees some opportunity for an optimistic outlook heading into the discussions between the government and Telstra and beyond. Credit Suisse said:

In order for the government to deliver its policy objective, it needs Telstra on side. So, despite the large regulatory stick, we still see plenty of scope for Telstra to extract value from NBN negotiations.

Merrill Lynch said:

Assuming Telstra agrees to the gradual structural separation and is allowed to acquire future spectrum and keep Foxtel, there are no changes to our earnings forecasts or valuation.

UBS said:

Structural separation, if it emerges, should help crystallise the value of assets and Telstra’s dominant fixed-line customer base. Additionally, separation should release Telstra from regulatory shackles.

I would suggest there was a little hyperbole in Mr Burgess’s commentary, but they are the sorts of shackles that he was referring to.

I put it to the House that, far from being a great detriment to Telstra, these reforms also provide great opportunity. As a nation we need to keep our eye on the big picture, which is ensuring that we have a telecommunications sector that is open and competitive—one that encourages innovation, one that allows consumers to access those products on that market as cheaply as possible and one where the market is as efficient as possible.

Citigroup were confident of a favourable outcome under the new management team. However, there is still a lot of uncertainty. Morgan Stanley said:

Telstra’s negotiating position appears to be far better than the current stock price implies, and we believe a more moderate outcome will emerge.

Deutsche Bank said:

We estimate the cost of structural separation is about $2.5 billion, but vending assets in return for a minority stake in NBN and transfer of $8.5 billion of debt could prove attractive.

These are hardly the sounds of the death knell of Telstra and hardly any support for this proposition that the Telstra share prices are going to take a hit of the sort that is being promoted by those on the other side.

I would like to draw the House’s attention to a couple of other comments that really go to this issue of the opportunities it creates for Telstra. I see in the article Reinvention Essential for Telco’s Future in the Australian Financial Review on 6 April:

There are potentially positive dimensions to structural separation for Telstra. A new wholesale division could be formed with capitalisation contributed by government and even in partnership with other telecommunications players.

This is obviously speculating on various options before the government’s announcement was made. It continues:

This business would be heavily regulated but would also be low-risk with predictable returns.

           …         …         …

It would still maintain significant market power because of its scale and brand. Its prospects of competitive success in this business must be considered good. With lower prices and better services, new waves of demand will be unleashed.

These are the sorts of opportunities that exist. We want to work with Telstra to deliver separation either structurally in a voluntary way or functionally. It will deliver a more open and competitive framework. (Time expired)

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