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Trujilo announces Telstra restructure, job cu -

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(generated from captions) look set to stay. SONG: # Be

careful what you pray for # That report from Heather Ewart. When new Telstra boss Sol Trujillo took over the reins of THE telco giant in July,

his brief was to revitalise the company in preparation for the Government's planned sale of its remaining 51% stake. Since then, the value of that stake has dropped 13%. Today, after a 4-month review, Mr Trujillo announced a major restructure of Telstra, one which involves the loss of up to 12,000 jobs over the next five years and a massive investment in new networks which will help deliver bigger profit margins.

If the pitch was at least partly designed to impress shareholders, the connection didn't go through because the share price actually fell 7%. Finance editor Emma Alberici reports.

Trujillo tu has answered the call,

fixed loins are out, wireless

technology is in and the customer

technology is in and the customer is king. We're going to be focussed

king. We're going to be focussed on a new customer experience. So it's

about when you call us, it's about

the product usage, it's about your

bill, it's about when you have a

problem... For Telstra's new chief

today's big bang presentation in a

packed conference centre on

packed conference centre on Sydney's waterfront was a chance to outline

his vision for Australia's biggest

Telco. There's no company anywhere

in this country that touches more

people. This country also touches

people. This country also touches as many shareholders as any other

company... 30kms away in a quiet

suburban study, a self-funded

retiree was thinking about his own

future as he watched Sol Trujillo

strut the stage.

strut t. I've got about 11,000

shares within the various family

portfolios. We bout them for growth

because it was the Australian thing

to do, to own shares in Telstra.

Bruce Bond bought his Telstra

Bruce Bond bought his Telstra Shires when he was working as a

high-profile finance adviser.

Nowadays he spends his time with

Nowadays he spends his time with the grandchildren lamenting what's

become of a once great company.

Well, I think management has lost

the plot. They have a great

organisation, a great company, but

they haven't looked into the future

and that's going to be - I hope,

and that's going to be - I hope, and I really hope, that the decision is

made in the next 6-12 months pay

off, but I have my doubts. He's not

the only one with doubts about the

results of Sol Trujillo's so-called

strategic review. A move to new

technologies which requires a

massive investment. $10 billion

massive investment. $10 billion over five years. In reality, it's only a

couple of billion more than what

couple of billion more than what was already earmarked to be spent on

upgrading the networks. All in all,

today' announcement sounded

remarkably familiar, probably

because we'd heard it all before

from the former management. This

time, though, it comes with a more

ambitious timetable. Finally in

terms of fro cash flow by 2010

terms of fro cash flow by 2010 we'll looking at the range of $6-20

billion in terms of free cash

generated in the business. We've

generated in the business. We've got a recommendation on Telstra. We've

had that recommendation for 12

months and at this stage I see

nothing that will make me change

that. What's your price target then?

What price do you think the share

also hit? We've get a price target

of $3.81 which we've had for a

while. Lower than it's ever got

before? It is lower than it's ever

get before and in fact I suspect

we'll get to that price target

pretty soon after this announcement.

That startling prediction despite

some very aggressive cost cutting.

The headline The headline

The headliner 1

The headliner 10-12,000 jobs to go

over the next five years. People

have get a right to be very, very

cynical about today's announcement.

They're entitled to think this is

just a part of a short-term

just a part of a short-term strategy to get a bounce in the share price

so the government gets a return on

its wrong-headed proposal to fully

privatise Telstra. But a quarter of

Telstra's staff aren't going to

Telstra's staff aren't going to walk for nothing. Redundancy costs will

see earnings drop even lower than

previously forecast. In August, Sol

Trujillo said this year's profit

would be down 10%. Now it's likely

to be as much as 25%, but if you

believe in the management there is

some relief in 2010. Margins are

some relief in 2010. Margins are set to agree from 48 to 52%. Analysts

to agree from 48 to 52%. Analysts at today's meeting just didn't believe

the maths. Telstra's margins are

already world's best. For them to

already world's best. For them to go up, is a big leap of faith. All of

today's financial forecasts came

with a big maybe in very small

with a big maybe in very small print at the bottom of each slide.

Cautioning that the figures were

subject to reasonable regulatory

outcomes. What that means is

anyone's guess, but what is fairly

clees is that Telstra's Mexican

stand-off with the government isn't

going to be resolved to the

satisfaction of Sol Trujillo.

Telstra is going to be forced to

provide competitors with access to

its network as a price it won't be

setting and won't be happy with.

Telstra will continue that fight,

but will it win? No. Our strategy

really isn't depend ent upon these

regulatory decisions. When I say

that I mean it in the sense of

transitioning the company to be

highly customer focussed. And then there's the bush.

there's the bush where network and

technological changes are on the

way. We've got to make sure that

promise and delivery become the

promise and delivery become the same thing. National Senator Barnaby

Joyce is worried it all might be

slight of hand. Within three years

the relatively new CDMA Network,

which services 1.4 million Telstra

mobile customers in rural and

regional areas, will be shut down

and replaced with whiz-bang 3 GSM.

With the massive job cuts there

With the massive job cuts there will be a few less humans manning rural

Australia and that wasn't spelt out

before Barnaby Joyce finally bit

before Barnaby Joyce finally bit the bullet on the Senate vote for full

privatision. There was no

privatision. There was no discussion about the loss of 12,000 jobs

about the loss of 12,000 jobs before we made the decision on the Telstra

sale legislation. I'm a bit

sceptical about whether that

knowledge was out there or not.

knowledge was out there or not. They say it wasn't - that that decision

hadn't been finalised. Once more,

hadn't been finalised. Once more, it comes down to a statement they made

and I suppose I have to accept it

and I suppose I have to accept it or not. It took 4.5 months to plan and

a mar shone five hours to present

and the big jaw-dropping moment was

Sol Trujillo's extraordinary Google

schmoogle claim that Telstra's

schmoogle claim that Telstra's onlin services through the directory

business would be better than

Googles, arguably the global

benchmark. It's an amazing

benchmark. It's an amazing boast,

after all Sol Trujillo's vantage

point in America was just a little

Australian Telco before he took on

the big job in July. Is this a

growth stock or income stom? At the

moment it's an income stock and 6

moment it's an income stock and 6 or 6.5% tax paid with dividend

impewtation or most of the tax paid

is a very nice return and better

than what you'd receive in a bank.

Bruce Bond's attitude is one shared

by most of Telstra's 1.7 million

shareholders and it is what will

ultimately support the share price.

The management have guaranteed the

dividend for three years. But as

dividend for three years. But as far as I'm kernd, we're going to hold

as I'm kernd, we're going to hold on to ours, we'll review the situation

over the next 6-12 months. The one

question Sol Trujillo wasn't asked

today was this: will he be there

today was this: will he be there in 2010 when the strategy targets need

to be met? It is always easy to

to be met? It is always easy to make predictions you're not the one

predictions you're not the one who's going to have to see them out.