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Shareholders sample broadband bill

Sue Lannin reported this story on Wednesday, November 4, 2009 12:41:00

ELEANOR HALL: To a company that has had a difficult relationship with the Federal Government.
Telstra executives today warned the company's shareholders that they may not be able reach a
mutually acceptable agreement with the Federal Government over its planned national broadband
network.

They say that the Rudd Government's plan to split up the company could cost as much as $1.2
billion.

But they say they are prepared to negotiate.

Finance reporter Sue Lannin has more.

SUE LANNIN: Sol Trujillo is gone and it's the new caring, sharing Telstra. The former chief
executive's multimillion dollar payout was unpopular. Chairwoman Catherine Livingstone sought to
soothe investor anger.

CATHERINE LIVINGSTONE: As the market was informed on February 26th this year, Sol Trujillo left
Telstra by mutual agreement.

(applause)

Mr Trujillo's termination payment of $3 million, the equivalent of 12 months fixed remuneration,
was strictly in accordance with the terms of his contract which was fully disclosed to the market
on his appointment in July 2005.

SUE LANNIN: Telstra chief executive David Thodey has been in the job for six months and says he has
battles ahead. One of the biggest is customer satisfaction.

The Telstra boss says charging customers a fee to pay bills over the counter was a mistake and will
be dropped.

DAVID THODEY: I believe that encouraging our customers to pay their bills electronically is the
right thing to do. However I made a mistake. We should not have implemented this change in the way
we did it, so I have decided to scrap the charge, effective today. And we will also automatically
refund all fees paid by our current customers since the new charge was introduced.

SUE LANNIN: The other big battle is the Rudd Government's plan to set up a national broadband
network. It wants to split up Telstra into retail and wholesale arms.

David Thodey says the company won't agree to the changes if market value is damaged, but he says he
is prepared to do a deal with the Government.

DAVID THODEY: Can I promise you that a mutually accepted agreement will be reached? No I can't. Do
I think that there is the possibility of a pathway to an agreement? Yes I do.

But what I can absolutely assure you of is that the board and management will not agree to any
proposals on the NBN or separation unless we are convinced that it will deliver fair value for you,
the shareholders of this company.

SUE LANNIN: The plan to split up Telstra is opposed by shareholders big and small.

Michael Perry from the Australian Shareholders Association says it will hurt the company's value.

MICHAEL PERRY: Shareholders are extremely concerned. They invested in T1, T2 and T3 in good faith.
I think shareholders recognised the risks of the marketplace and accepted that. However what we are
seeing now is the threat of a new type of risk which is the Federal Government using its sovereign
power to interfere with the marketplace and that is, in Australia, a relatively new departure and
one that I believe would concern, well certainly does concern shareholders and has ramifications
for their future actions.

SUE LANNIN: David Thodey was sounding more conciliatory today by saying that he couldn't promise
that there would be a mutually acceptable agreement.

MICHAEL PERRY: Well that's not really conciliatory as far as the shareholders are concerned. That
sounds more conciliatory with the Government, however we do recognise that the Telstra board has
taken to heart the views of its shareholders and I believe they will be trying to do the very best
for their shareholders.

SUE LANNIN: But do you think shareholders could lose out?

MICHAEL PERRY: It's possible yes. It is certainly on the horizon of possibility that shareholders
could lose very substantial value through an enforced separation.

ELEANOR HALL: That's Michael Perry from the Australian Shareholders Association speaking to Sue
Lannin.