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Telstra strikes back -

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TONY JONES, PRESENTER: Telstra is becoming more strident in its criticism of the Federal
Government's plan to carve up the company.

The telecom giant is warning of devastating consequences should the Government get its way.

And it's winning the support of key shareholders.

Michael Rowland reports on the stand-off.

MICHAEL ROWLAND, COMMUNICATIONS CORRESPONDENT: The plan to break-up Telstra has stirred a hornet's
nest of criticism. The Government's now feeling some of the sting.

ANTON TAGLIAFERRO, INVESTORS MUTUAL: In our view, there will be no winners from the new legislation
in its current form, no win-win in this legislation.

MICHAEL ROWLAND: Some of the country's biggest investors have used a Senate committee hearing in
Melbourne to savage the plan to separate Telstra's wholesale network from its retail business.

ROSS BARKER, AUST. FOUNDATION INVESTMENT COMPANY: I don't think people anticipated that it would be
the sort of regulatory change where you dismember the company.

MICHAEL ROWLAND: All music to Telstra's ears. Company executives have spoken for the first time
about why they're fiercely resisting the carve-up. From their point of view it will reduce
competition and hurt customers.

GEOFF BOOTH, TELSTRA EXECUTIVE: And it could destroy value for the 1.4 million shareholders who
have purchased Telstra shares from the Government over the past 12 years.

MICHAEL ROWLAND: Telstra says the break-up of overseas telecommunications companies like Britain's
BT have been spectacular failures.

TONY WARREN, TELSTRA EXECUTIVE: The pretty clear outcome is that it's harmed shareholders, it's
harmed consumers. It's taken a long time and diverted a lot of management resources.

MICHAEL ROWLAND: Telstra's competitors are urging the Government to press ahead with the plan,
insisting the Australian market is in desperate need of reform.

ANDREW SHERIDAN, OPTUS EXECUTIVE: Prices for both voice and broadband services remain high and
take-up of broadband services is relatively low.

MICHAEL ROWLAND: Despite its full-throated opposition to the legislation and the vocal support of
its shareholders, Telstra knows it's not exactly bargaining from a position of strength. The
Government hopes to move forward with the break-up by the end of the year.

Michael Rowland, Lateline.