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Market must be urgently informed about Telstra and the government's USO attitude

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M E D I A S T A T E M E N T Stephen Smith MP Member for Perth Shadow Minister for Communications

58/99 Wednesday 22nd September 1999


Shadow Minister for Communications, Stephen Smith, today said that the Government had failed in its duty to inform the market about its intentions with regard to the cost to Telstra, as the national Universal Service Provider, of servicing the Universal Service

Obligation (USO).

Commenting on a suggestion yesterday that the Government would release details of proposed future USO arrangements “within four weeks", Mr Smith was critical of the failure of the Minister for Finance and the Minister for Communications to announce the Government’s attitude to the cost to Telstra of providing the USO, prior to the Telstra 2 share offer period, which opened yesterday.

Earlier this year, the Opposition supported Government legislation which capped the cost of the USO at $253.32 million for the 1997/98 financial year, as compared with Telstra's cost recovery claim of over $1.8 billion for that financial year.

The Government’s legislation also provides for the Minister for Communications, subject to Parliamentary disallowance, to cap the cost of the USO for the 1998/99 and 1999/2000 financial years if required.

In July the Australian Communications Authority released a preliminary calculation of $580.2 million as an assessment of the cost of the USO, some $330 million more than the capped figure.

“Telstra currently meets approximately 85% of the cost of providing USO service, with the remaining 15% recovered from the rest of the telecommunications industry, according to their respective market shares. Clearly, any change to Telstra’s USO cost in the order of $600 million over two financial years has implications for Telstra and its

shareholders,” Mr Smith said.

“It is critical that the Government’s attitude to the cost of the USO for the 1998-1999 and 1999/2000 financial years is made public immediately, given that purchase offers on Telstra shares have already commenced and given that the time for the Telstra 2 book- build process is close at hand,” Mr Smith concluded.

Media contact: Patrick Bindon (02) 6277 4108 or 0418 694 878

R1 113 Parliament House ACT 2600 Phone: 02 6277 4108 Fax: 02 6277 8520