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Major moves at the top of Telstra -

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Major moves at the top of Telstra

The World Today - Friday, 8 May , 2009 12:19:00

Reporter: Peter Ryan

PETER CAVE: There's been a major shakeup at the top of the telecommunications giant, Telstra.

The telco's controversial chairman Donald McGauchie has announced his resignation in a move which
is designed to repair some of the shattered relations with the Federal Government.

At the same time a Telstra insider David Thodey has been appointed Telstra's new chief executive,
replacing Sol Trujillo who resigned earlier in the year.

I'm joined in the studio now by our business editor Peter Ryan.

Peter we'll look at David Thodey's appointment shortly, but did Donald McGauchie's resignation come
as a shock to everyone?

PETER RYAN: Well Peter the writing was on the wall not just in Canberra but also the Telstra
boardroom it seems. Remember Donald McGauchie and Sol Trujillo were part of what's now regarded as
a very destructive team, firstly in relations with the Howard government, but things only got worse
under the new Labor Government. And things got so bad that Telstra was ultimately frozen out of the
Government's tender for the National Broadband Network.

And recently Mr McGauchie has been in a very public battle with one of Telstra's key shareholders,
the Future Fund, and the fund's chairman David Murray had made it very clear in a number of
newspaper interviews that relations with the Government needed mending.

So today Donald McGauchie has resigned and he's been immediately replaced by Telstra director
Catherine Livingstone who paid this tribute at this morning's media briefing in Melbourne.

CATHERINE LIVINGSTONE: Through his hard work and commitment, Donald led the board through Telstra's
transition to a fully privatised company and at the same time encouraged management's initiative
whereby it started the complex transformation across the company's operations. It was an extremely
difficult job handled with great care and professionalism by Donald.

PETER CAVE: Telstra's new chairman Catherine Livingstone.

Peter this morning's other big news as we've said is the appointment of David Thodey to succeed Sol
Trujillo as chief executive. What we do know about him?

PETER RYAN: Well Peter what we're seeing is a steady as she goes appointment, after the roller
coaster ride under Sol Trujillo and Don McGauchie. It should be noted also that neither Mr Trujillo
nor Mr McGauchie attended this morning's briefing.

But still David Thodey had the floor with Catherine Livingstone. He's been a senior executive with
Telstra since 2001 and has been the head of sales to corporate and government customers.

His big challenge will be rebuilding relations with the Government and getting some role in the
construction of the National Broadband Network.

But it's very clear that Mr Thodey's strategy will be evolution, not revolution. He wouldn't
criticise Sol Trujillo this morning or say what he really thought about the overall broadband
strategy.

DAVID THODEY: I think it's been a tremendous period that I've worked with Sol through. It's been an
enormous amount of work we've done on the transformation and Sol has been a great leader and I've
really appreciated the opportunity to work with him and I think that we'll take it forward from
here and how we work with the Government and how we can really find the best option for Australia
and Telstra.

REPORTER: You didn't really say what you thought of the strategy though when it came to the
National Broadband Network.

DAVID THODEY: Yes, well because I think it's important to look forward, because that's the most
important thing we have to do now. We have to take this company forward and we have to look at what
we can do to really get a good outcome here.

REPORTER: So you didn't think much of their strategy?

DAVID THODEY: No I said we're looking forward.

PETER CAVE: Telstra's new chief executive David Thodey, looking forward.

I understand there have been other changes announced. What are they?

PETER RYAN: Yes Peter, another board member Peter Willcox has left Telstra's board. He's been a
defendant in ASIC's pursuit of the building products company James Hardie in relation to disclosure
over the company's asbestos compensation scheme.

Also Telstra's chief financial officer John Stanhope, who was a contender for the CEO job, has been
made an executive director of the board.

This might be the start of other changes in direction for Telstra but don't expect a halt to cost
cutting or job losses anytime soon.

Meanwhile analysts such as Ivor Ries of Baillieu Stockbroking think David Thodey's biggest
challenge will be rescuing Telstra's sinking share price.

IVOR RIES: Under the Trujillo regime Telstra went from being one of the favourite stocks of all the
analysts around the market to basically almost toxic waste. I mean it's very hard to find any of
the major telco analysts to say anything nice about the company. So building bridges with the
financial community will be one of Thodey's big challenges.

PETER CAVE: Ivor Ries of Baillieu Stockbroking.

Peter has all this shakeup done anything for the share price?

PETER RYAN: Peter, Telstra shares initially rose around 2 per cent but they've now settled down to
around $3.24. That's a long way from last year's peak in May of $4.86 and even further from the T2
issue price of $7.40.

PETER CAVE: Our finance editor Peter Ryan, live in the studio.