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Howard defends Telstra sale -

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(generated from captions) ridiculous conflict of interests.

You see, the government may have

You see, the government may have 51% of the shares, but we don't run the

company. Nobody from the government

sits on the board. Decisions about

dividends are made by the company

and the share price is a product of

a number of factors, including of

course the increased competition

course the increased competition and I was interested that one of the

commentators there made the point

that Telstra's complaint that some

of the profit down ingrade was due

to overburdensome regulation was

to overburdensome regulation was not accurate. There are a number of

reasons why a company would

downgrade its profit and it's not

for me to justify or, indeed,

condemn what Telstra has done

because the management runs the

company. The government doesn't. We

don't want to be in this ridiculous

situation where we don't control

situation where we don't control the company in an operational sense,

company in an operational sense, yet if something goes wrong, because

it's 51% owned by the government,

the government is held to account

the government is held to account by its political opponents and by some

others. But Mr Howard, this is a

situation entirely of your own

making. This situation applies now

because you decided to tell a third

of the else tell, you then decided

to sell another 16% of Telstra.

You've put the government into this

position where, as you say, it is

conflicted and now you're using

conflicted and now you're using that as your main justification for

selling the rest of Telstra.

Well, the justification for

privatising Telstra is based on a

number of things, including the

conflict of interest. Another

conflict of interest. Another reason -- It's a conflict of interest

-- It's a conflict of interest that you set up. Yes. Kerry, I

you set up. Yes. Kerry, I understand that. But, the reality is that even

if we had been - if we had remained

100% shareholder, we still would

have in the name of competition

have in the name of competition been regulating both ourselves as the

100% shareholder and also the other

competitive rivals of Telstra. It's

the sort of argument you've just

about advanced would be fair enough

if Telstra had no competitors. But

thankfully Telstra does have

competitors and because Telstra has

competitors, we now have some of

competitors, we now have some of the cheapest mobile phone situations

anywhere in the world and we have

enormous addition natural benefits

to customers - additional benefits

to customers. So we can't go back

to customers. So we can't go back to where we were -- You are

where we were -- You are suggesting it's not possible for the

it's not possible for the government to set up a competitive environment

when running a private company. You

said you weren't in favour of

government-run enterprises a but

government-run enterprises a but you have the post office an institution

which is compet oif on a number of

fronts and efficient. Why is there

no conflict with the government on

the post office? Kerry, I think

both the size and the skill of the

business and the nature of the

competition in the market is

entirely different in relation to

postal services, entirely different.

If posting letters around

Australia is a vital public

infrastructure underwritten and

run primarily by the government

but with competitive forces, why

isn't the telephone call? Well,

Kerry, the telephone call is a very,

very important community service,

but the size and the scale of the

business and the experience of tell

cos and their international

operation makes the whole

comparisons of an entirely

comparisons of an entirely different order Don't think it's a valid

comparison. I really don't. Okay.

You would have us believe, or you

certainly would have up until this

news has broken t that Telstra was

in great shape, although Sol

Trujillo has revealed there's

Trujillo has revealed there's faults on 14% of Australian phone lines

on 14% of Australian phone lines and the previous management

underinvested in critical

infrastructure and there have been

millions and millions of complaints,

that he isn't confident he can even

maintain the value of Telstra's

shares, let alone increase it and

he's downgraded profit forecast.

Perhaps some would say no wonder

Perhaps some would say no wonder you want to sell it. Kerry, our

commitment to sale well proceeded

commitment to sale well proceeded Mr Trujillo, but the question of

whether information about the

company should be made available,

that is an obligation on the

that is an obligation on the company and they have to make that

information available to the Stock

Exchange. I'm not going to comment

on what Mr True trou told me on

on what Mr True trou told me on 11th August. But he's made that -

August. But he's made that - that's now a public document, Mr Howard,

now a public document, Mr Howard, so we can talk about it. Kerry, my

obligation is to obey the law.

It's a lawless document, Mr

It's a lawless document, Mr Howard. I'm sorry, my obligation is

to obey the law and the law says

that information give on the me and

give on the the government as the

principal shareholder can't be

disclosed to outsiders. If Mr

Trujillo has decided to make

something public, that's his

decision. Can I just make the point

-- Because it's a document, surely

you can talk about it? No, no. I'm

not going the talk in a situation

not going the talk in a situation where I could be in breach of the

law. We were Given certain

information and that information

should not be disclosed by the

government because the law says it

can't be disclosed. The obligation

of disclosure to the public - and

this is fundamental to this whole

debate - is the obligation on the

whole company and if company has to

disclose information to the Stock

Exchange. Belatedly or otherwise

they've now done that. You sent a

very clear message -- Hang on.

Kerry, that's something for ASIC,

which is investigating to decide.

If you're not going to talk about.

If you're not going to talk about. You raised it so I had to make it

clear to your viewers. Well,

clear to your viewers. Well, you've done that. That's a matter for ASIC

to determine and it's not a matter

I'm going to comment upon, but the

information he gave me, I was

prevented by law from making

available. Okay. His obligation of

disclosure to the Stock Exchange

directly and not to the public

through the government. You sent a

very clear message to Telstra's

senior executives from parliament

yesterday that their obligation is

"To talk up the company's interests,

not talk them down." That sounds

awfully like you're telling them,

awfully like you're telling them, as you prepare to sell your remaining

51%, we only want the public to

51%, we only want the public to hear good news, where's the priority in

that, at least in the appearance of

it? Kerry, I don't think there's

anything I said yesterday that was

encouraging Telstra management to

tell lies. You are saying we only

want top hear the good news.

I'm not saying that - Kerry, with

great respect that is wrong. To

talk up the company's interests and

not talk them down. Of course. If

you're employed by the company, the

company hardly expects you to go

around saying it's a bad show.

Aren't there obligations of

corporate governance for any make

company. Yes, yes. To be honest

about the state of its affairs.

Absolutely. That's what ASIC is

investigating in relation to Telstra. Why did Telstra. Why did you say that?

It's a statement of common sense.

It's possible for someone as a

senior executive of a company to

be positive about the company and

also be completely honest. I

also be completely honest. I don't think there's any conflict at all

and I think it's a perfectly

reasonable common sense thing to

reasonable common sense thing to say that if somebody has a senior

management position in a company,

they had some obligation to talk up

the country's interests - company's

interest, rather, and not go around

denigrating them. That's the point

denigrating them. That's the point I made and I think most of your

viewers would agree with me. They

have the obligation to be honest

about the statement of their

affairs. Mr Trujillo says he's

affairs. Mr Trujillo says he's being honest about the state of their

affairs and he says the affairs

aren't good. He says he made plain

they dipped into reserves to best

dividends to keep shareholders

happy; that the Telstra bored

believes that that practice of

dipping nose those reserves is

unsustainable; he's made plain that

he was shocked by the state of

Telstra when he arrived here; that

he doesn't believe it equates with

anywhere near best practice around

the world and that it's been

undervested. Well, Kerry, you are

right to say that he has an

obligation of proper disclosure and

an obligation of honesty to the

market and that's something that

will be investigated by ASIC and

will be investigated by ASIC and I'm not saying he's being dishonest.

not saying he's being dishonest. I'm not saying anything about whether

there's been adequate disclosure or

not, but everything that you've

not, but everything that you've said really does endorse the point I

really does endorse the point I made at the beginning and that is it is

at the beginning and that is it is a ridiculous situation that the

government should be answering

questions about in effect the

operations of this company when we

don't have any role at all in the

company's da-to-day operations. It

underlines the absurdty of the

position that we're now in and why

sit necessary for this government

sit necessary for this government to complete the process of

privatisation. I mean, I don't sit

on the board, I don't talk to the

mangle director, I don't talk to

mangle director, I don't talk to the chairman on a regular basis. That's

something that is left to the

operatives of the company. That is

why it's self-evident from the last

couple of days that the most

sensible thing is to end this

conflict of interest and complete

the privatisation. You certainly

didn't hesitate to lift the phone

didn't hesitate to lift the phone to the chairman yesterday. No, because

I was conveying to him a view --

As the majority shareholder.

As the majority shareholder. Yes, and I'm entitled to do that.

From time to time, it's in fact the

first conversation I've had with

first conversation I've had with the chairman of that kind for ages.

So when you sat in that meeting

with your ministers and Sol

Trujillo last month, and I won't

ask you to reveal what you heard

that day, even though we now know

it, and you heard what he had to

say, were you shocked? Did you

say, were you shocked? Did you ask Helen Coonan or Nick Minchin, your

ministers, whether they'd known

anything about the various strands

of this apparently very grim

picture? Well, Kerry, I don't

picture? Well, Kerry, I don't want to go into all of the details of it.

I will say this: consistent with

the obligations I have under the

Telstra corporation act that the

principle purpose of that gathering

was not for Mr Trujillo to acquaint

us with certain aspects of the

company, but rather to put a

proposition to the government --

But were you surprised by what

But were you surprised by what you heard, Mr Howard? Let me finish.

To put a proposition to the

government that involved the

expenditure of a large amount of

expenditure of a large amount of government money. In all times with

our dealt wtion the company we've

made it very clear that that

made it very clear that that company should make of course full and

continuous disclosure to the Stock

Exchange and it has never occurred

to me that the company would have

done anything but that. Did your

relevant ministers know before that

meeting that tell telg was

neglecting critical infrastructure

spending to the tune of $2 or 3

billion and if your ministers

billion and if your ministers didn't know, why didn't they know? Well,

Kerry, the question of what

precisely my ministers knew in

relation to particular things I

would have to speak to them in

relation to those particular things

before I could answer that question.

But surely you would have had the

instinct, the urge to ask them

that question as this unfolded?

that question as this unfolded? Kerry, Kerry, the context of the

meeting was this company was

putting a proposition to us and

that proposition involved the

expenditure of the significant

amount of government money and we

subsequently decided that the

proposition that we have

and is associated with the Telstra proposition that we have announced and is associated with the Telstra sale legislation is a

sale legislation is a far better

sale legislation is a far better one for the customers. Telstra doesn't

even have enough confidence in

itself to authorise a buy back of

shares. It doesn't have enough

confidence in the future of its own

shares. I wonder why anyone else

would want the buy them in that

sense? Kerry, that's your

statement. It's a question.

No, you can make that statement.

But, you see, once again, you are

But, you see, once again, you are putting that question to me as if I

were responsible for running

Telstra. You see, you have - no, no,

listen. It's about - this is a

question te you, as the government

who wants to sell the shares.

No, no, no, I'm sorry, Kerry. What

you are basically saying is you

you are basically saying is you tell me why anyone should want to bow

Telstra shares? Kerry, the question

you should put that question to is

the chairman of Telstra. You should

put it to the mangle director of

Telstra. I don't run Telstra. No,

no, I'm putting it to you as the

person who wants to sell 51% of it.

Why would anyone want to buy your

51%? No, no, the reason we want to

sell it, Kerry, is because we

believe there is an unacceptable

conflict of interests and we also

believe that from Telstra's point

believe that from Telstra's point of view, if it were freed of

view, if it were freed of government majority ownership, it would be

majority ownership, it would be able to operate in the market like a

proper company. It could, for

example, issue some new shares. It

can't do that at moment. Who wants

to raise some new capital, it can't

go out and issue new shares because

the government's ownership under

the government's ownership under the present law can't fall blo 50% and,

therefore, it can't have a share

issue. Now, that in my view

unreasonably restricts the

unreasonably restricts the operation of the company, but to put

of the company, but to put questions to me about whether you should buy

or not buy an individual Telstra

or not buy an individual Telstra share assumes that I'm running the

company. I'm not. But you are

company. I'm not. But you are really in effect unwittingly acknowledging

the very point I made that we have

this ridiculous conflict of

interests that we are simultaneous

interests that we are simultaneously a 517% shareholder, but we're also

the regulator and on 11th August we

were also as the government a

potential source of financial

support. Mr Howard, we have to

leave it there unfortunately

leave it there unfortunately because of our problems at the start of the

program. Thanks for joining us.

Thank you. And that the program

Thank you. And that the program for tonight. We'll be back at the same

time tomorrow, hopefully unhindered,

but for now, goodnight.