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Telstra commits to rebuilding relations -

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Telstra commits to rebuilding relations

Peter Ryan reported this story on Thursday, August 13, 2009 12:18:00

ELEANOR HALL: To the economy now where profit results this week are prompting the question: what
economic crisis? Today Australia's biggest telecommunications company beat market expectations to
deliver a 10 per cent rise in its profit.

And Telstra's newly installed chief executive David Thodey is promising to rebuild Telstra's
fractured relationship with the Federal Government. Mr Thodey warned though that while the company
has weathered the global downturn he's expecting slow economic growth ahead.

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

ELEANOR HALL: So Peter, Telstra is the latest company to deliver an unexpectedly large profit. How
does its CEO explain this?

PETER RYAN: Well Eleanor, as you say Telstra's profit is up 10 per cent on last year at just over
$4 billion. That's well ahead of conservative estimates of $3.8 billion and it's the biggest profit
in four years.

But this is where it's come from. The growth has been led by greater demand for mobile phones,
notably iPhones and BlackBerries and internet services.

David Thodey says business is tough but that traffic on Telstra's mobile network is doubling every
19 months. And Telstra says earnings on mobile phones are now greater than the traditional fixed
line connections for the first time.

And as we know from history Telstra has been damaged badly by people getting rid of their fixed
line connections in favour of mobiles. Fixed line phone connections are still falling through the
floor, down almost 5 per cent to $6.3 billion while mobile sales are up 7 per cent at $6.8 billion.

But to bring things back down to earth, Sol Trujillo's five year targets for earnings and revenue
flagged back in 2005 appear to have been revised and are now less significant to deal with the
slower environment given the global financial crisis.

ELEANOR HALL: Yes but we heard yesterday from the Commonwealth Bank's CEO that things are still
tough ahead despite it delivering a $4 billion profit.

Mr Thodey is saying the same thing today. I mean given the size of these profits in a year of
financial meltdown, is that believable?

PETER RYAN: Well Eleanor this is all about managing expectations about the extent of any recovery,
reminding investors that the boom days are probably over and that growth from going forward will be
very slow. But you're right - it is a stellar profit considering what we've seen in the United
States and Europe.

However for every economist who talks about those green shoots of recovery there are probably two
or three warning about "false dawns." And keep in mind unemployment here and in the United States
and Europe is yet to peak and when it does Telstra's profit and the profit of other companies will
probably come under pressure.

ELEANOR HALL: Now what is the new Telstra CEO promising to do to change Telstra's relationship with
the Federal Government, which has of course been more than fractious?

PETER RYAN: Well just a bit of a history lesson here. David Thodey inherited a very unhelpful
legacy from Sol Trujillo and proposals to separate Telstra's wholesale and retail arms are still
being developed and most likely lobbied against and relations with the previous and current
governments have a very long way to go after relations became poisonous under Sol Trujillo.

But at the top of the agenda Telstra is now working very hard to get a role in the construction of
Kevin Rudd's $43 billion national broadband network.

Mr Thodey wants to rebuild relations on the Government and regulatory front and he says Telstra
wants to compete aggressively but not at any price.

DAVID THODEY: We share the vision that the Government has for a fibre to the premise solution. And
we share the view of the Government that we have to engage. They are willing to engage and so are
we.

But we are engaging based on one premise and that's about driving shareholder value, protecting
shareholder value.

ELEANOR HALL: That's Telstra's chief executive David Thodey speaking to analysts earlier today. Now
David Thodey also announced some changes to Telstra's customer service. What's he talking about?

PETER RYAN: Well first up David Thodey is looking after shareholders and that's why Telstra's
dividend was maintained today as expected.

But customer service is very high on the agenda. Telstra has a high level of complaints and
internal system problems as you'd expect with any massive technology company. But David Thodey says
there are way too many and he's set new guidelines to ensure changes are made.

He says Telstra staff right across the board will feel financial pain in the area of bonuses and
rewards if customer service doesn't make a big improvement.

DAVID THODEY: We have set new targets across the business. For every complaint that comes in our
target is to acknowledge it within 24 hours and respond in some way with a solution or an agreed
action plan within five working days.

Also we have set a target for all Telstra employees and a bonus around customer satisfaction. This
includes all our call centre staff, every technician, every engineer right across the business.

Now what this is about is measuring them, measuring us on the voice of the customer.

ELEANOR HALL: That's Telstra's chief executive David Thodey and our business editor Peter Ryan
keeping us up to date.