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Telstra update -

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(generated from captions) It's been an interesting week in the ongoing saga over the sale of Telstra. Of prime importance was the decision on Thursday by National's Senator Barnaby Joyce to support the sale - virtually a green light for the Government. At week's end, Telstra had decided to keep its head down and say nothing. But Communications Minister Senator Helen Coonan talked to Katrina Nicholas. It was war, according to the media at least. Sol Trujillo and his band of US confidants, known variously as the 'Three Amigos or 'Team America', had crossed $30 billion swords with the Australian Government. The battle was on. The spoils of war were terms of T3's contentious sale. The interests of Telstra on one side and the Government on the other with the shareholders and the share price held hostage. It has got off to a rocky start between the new Telstra management and the Government but there's a fabulous American saying which goes, "It's nothing personal, it's just business," and I think that's how Sol's operating. Loosely translated it means, "I have to tell you some things that you may not want to hear, "but for the good of the organisation, "I think this is what we have to do". I think he's a seasoned international telco executive but I find the decision of Sol very interesting and I think the board knew exactly what it was doing. It had to get somebody from out of the fray, out of the political process, come in with a very clean slate, and they've done that. ACCC Chairman Graeme Samuel certainly didn't mince words when he appeared on our program last week. Look, I think that what we're getting out of Telstra at the moment are a whole lot of noises that are very aggressive, you know. If you were to mark the political strategy at the moment, Government relations strategy, you'd probably give the 15 out of 10 for aggression

My own assessment, for whatever it's worth, is probably about 3 out of 1 for effectiveness But during the week, it became clear

that the Government was keen to play the whole thing down. It's in no-one's interests to make things worse. Certainly Finance Minister Nick Minchin was taking that line. I totally support the board's proces and, indeed, it's appointment of Sol Trujillo and, in my view, I thin he's absolutely the right perso to be managing this very significant Australian company at this time I think he does brin enormous experience from the US that's valuable to Australi and a real zeal and energ and creativit and a capacit to turn this into a creative, dynamic, innovative company But what does it all mean to Telstra's other 1.6 million shareholders and to the market in general? I think he's coming to the proces fairly late in terms of the regulatory change and he's done quite a reasonable jo in making a stand Sometimes you have to do that but it is a dangerous game and the share price's obviously suffering I think the investment community so far has been favourably disposed to Sol, you know. There has been some difficult things said, there's been obviously some tension between the Government and Telstra, but, overall, I think the investment markets appreciate what Sol's saying. That may be the case but it's understood several in Telstra's existing executive team don't like Trujillo's American management style. He's wasted no time putting his own stamp on Telstra and already one senior executive, Ted Pretty, has walked. I think one of the hardest things for a new CEO to work with the existing management teams is when someone says to you, "You don't understand how we used to do things around here." That's very hard for a new CEO, an American CEO in particular, to fathom that. My only advice is probably three movies he can go and see - maybe on a wet Melbourne Sunday or Saturday he can rent.

One would be 'The Dish', the other one would be 'The Club' and the third is the Australian classic 'The Castle' Telstra has decided to keep mum at the moment, and despite requests from just about every media outlet in Australia, won't allow Sol to do an interview, but Senator Coonan did agree to talk to us. What do you think of Sol Trujillo Well, I've met him. I think he's very engaging and I think that he will be a very effective CEO at Telstra. I think his approach to a review of all of the parts of Telstra, no stone unturned, is what you'd expect with a new broom, somebody coming in to look at how to get this very big business ready for privatisation.

I think he's doing all the right things as far as the operational side is going and I think that, whilst I appreciate that he would question the regulatory review, he's from a different regulatory culture and I think all of those things will settle down and I think the company would be very well served by having Sol at the helm. Is it true that you haven't see eye to eye on some regulatory issues Well, we haven't but you'd expect that, I think, wit a major telecommunication company facing privatisation - obviously he wants to look at how to maintain the best regulatory review for them That's part of how they maximise their business but my job, of course, is to look at the national interest, to look at the competitive environment

and to make sure that we don't turn a publicly owned monopoly into a privately owned monopoly, or dominant player. Did it take some people in Canberr off guard No I don't think so.

I think the only thing that was perhaps unexpected was an 11th hour proposal that did have some good points to it. It wasn't as if the proposal lacked any coherence or any sense but there was a process in place that had been in place for many months that looked at a much more technology-neutral and a competitively neutral platform to deliver new services that we had in mind as part of a very large package. Certainly from my perspective, I appreciate that they come from a very different regulatory environment and one where the telecommunication companies have never had a government overhan as part of their shareholding. They've never been government owned and it's had a very different history, and perhaps very different problems as a result. Also just want to touch o the foreign cap That seems now it's going to remain at 35% Can Telstra be sol with that restriction Well, Nick Minchin has said that we're going to keep that cap and I think that that's appropriate I think Telstra is in a slightly different position to a lot of other potential privatisations. I mean, it is an icon company. I think consumers are a lot more confident if there's that cap there

and it's been raised with me as I've travelled around Australia. I think that we will be able to, based on our current advice,

we'll be able to structure the sale in such a way that meets the market conditions when we come to look at it next year with the cap. Now Sol's brought in hi 'Three Amigos', or 'Team America', what do you think about that Well, it seems to be a tradition when you get a foreign CEO that they tend to bring with them people who they trust, people who they've worked with and people who they feel can help them to deliver what they're there to do, so I think we should give this executive team an opportunity to work and we do think that it's appropriate that they can have that kind of freedom to look at the operational side of the company. These are all experienced people. I think we need to just let them have a bit of air and let's see what they can do. Are they causing rifts in Telstra Well, I wouldn't have thought they' be causing rifts within Telstra, other than the kind of rifts that always happen when you've got a new management team and you're looking critically at the operational side of the business. I think it would be almost impossible not to have some shake-ups here and there but, as I say, I think we need to give these guys a bit of clear air rather than be critical of them. So Barnaby Joyce how much of a relief was that Well, quite frankly I'm very please to have support for this package from any source

but I'm very pleased that, obviously Senator Joyce has seen fit to indicate his agreement with this package. He's now suggesting that you coul have got the package throug without his support Well, I won't indicate just how that would have gone because you never really know until you take a vote how it's going to travel when it gets into the Senate, but I have said, and I think it's fair to repeat here, I've said no sale, no deal and I meant it and Barnaby has taken me at my word and said that, if we really want to get this kind of investment, we do have to proceed with the sale bill, the authority to sell and I think that that's had an impact. After the break - retailer Gerry Harvey and partner Katie Page making a move on Eastern Europe. God bless her, she does some wonderful things And it's so good when he goes bac to his mates and says, "You'll never know what she's done now.