Howard says Telstra privatisation will not be rushed

18 Oct 2004

Australia’s Prime Minister John Howard has said that the government is unlikely to sell its 50.1% stake in incumbent telco Telstra before 2006, claiming that even this date could be optimistic. Howard, whose Liberal/National Coalition Party was re-elected earlier this month, said that he would be laying down a series of conditions that must be met before the sale could even be considered, including the improvement of telephony services in rural areas. He said that Telstra’s share price, which closed at AUD4.69 on Friday, would also need to pick up before it could be privatised. The government first announced plans to sell off Telstra in November 2002 when it claimed that the telco had made sufficient improvements in the wireline sector to enable it to go ahead, but the following month the sale was postponed due to political opposition and weak market conditions. Before the 2004 elections took place, Howard again said he was keen to dispose of the government’s AUD31 billion (USD23 billion) stake in the national operator as soon as possible, but the plans have now changed again.

The country’s former monopoly operator, Telstra continues to dominate the fixed line market, although it has seen its share of the local sector being eaten away by its rivals SingTel Optus, Primus and AAPT. Its main competitor is Optus, which offers services over its own local network, while the others provide services over Telstra’s network through local loop unbundling (LLU), which has been available since July 1999. There is little room for growth in the wireline market, with the penetration rate standing at 54.2% at the end of 2003; there were 10.8 million local lines in service at the same date, up from 10.6 million the previous year. Alternative players have thus had to try to steal customers away from Telstra and have been particularly successful in the long-distance and international sectors, as well as in the ADSL arena which began to take off in 2003/04. After a slow take-up mainly due to Telstra charging its wholesale ADSL customers more than its retail customers, at the end of September 2004 Telstra reached its target of one million broadband customers, a year ahead of schedule and revealed that it was on track to reach another target of achieving broadband revenues of AUD1 billion by the end of 2006.

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