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Tuesday, 26 May 2009
Page: 4310

Mr RANDALL (5:51 PM) —I am pleased to be part of the debate on the Appropriation Bill (No. 1) 2009-2010 and cognate bills and to make my contribution. This budget reveals the high price all Australians will pay for Labor’s reckless spending spree. After inheriting the most favourable set of economic conditions, it has taken only 18 months to achieve a record $58 billion deficit, put one million Australians out of work by 2010-11 and record a net debt of at least $188 billion by 2012-13. So much for working Australians! Labor introduced tax hikes which increased revenue by $26 billion. Have you noticed that the Labor Party have stopped talking about working families? Because they will continue to put them out of work. The annual interest bill paid by the Australian people in 2012-13 will be $8 billion. That is more than $9,000 a year for every Australian. Sadly, Labor have lost control of Australia’s finances.

In my electorate of Canning, 68 per cent of residents will be affected by changes to private health insurance through higher premiums because of Prime Minister Rudd’s broken promise to not change health insurance rates. While I welcome the rise in the rate of the single pension, my office has been inundated with calls from local pensioners trying to cut through the spin. Let us not forget that the government did not really want to raise the pension. They stalled and waited for a review. The increasing pressure from the opposition and age groups forced this move. No doubt Mr Rudd’s spin doctors, Hawker Britton, had told him that it was inevitable.

The government talks about corporate greed and golden handshakes. Surprise, surprise—in an effort to tackle the growing epidemic the government has launched a new review. I understand that the Productivity Commission will report on executive remuneration by the end of the year, and today I want to raise one of the worst examples of corporate malevolence in this country. I have been an ardent critic of Telstra in recent years. After Sol Trujillo’s appointment as CEO, Telstra’s mantra was complete domination and thuggery, played out in a high-stakes game of aggressive bluff. Telstra wanted to reduce the regulation that applied to it, limit competition and, in turn, cost everyday Australians more for the privilege. Mr Trujillo and his American mates ripped apart Australia’s national carrier but made sure they looked after themselves in the process. But now we, including Prime Minister Rudd, have said ‘adios’ to Sol Trujillo, his four amigos, and chairman Donald McGauchie. I can only hope a new era for this country’s leading telco has dawned. But I fear it may be a case of blink and you will miss the change.

Armed with a $600,000 relocation bonus, Trujillo arrived in 2005 with a throng of American consultants in tow—Bain and Co, which was paid $54 million, led the way. His amigos—Greg Winn; Bill Stewart; the belligerent so-called government relations manager, Phil Burgess, who probably did more damage to government relations than any other single Telstra executive; and Tom Lamming, senior vice-president of transformation—came to implement his vision and have all now departed, or have announced their departure, from the sinking ship, significantly richer personally for their efforts. Sol came with a plan but was ignorant as to doing business in Australia. He wanted $12 billion to turn Telstra around. Sol’s plan was so anticompetitive no-one could come at it. He offered to build a fibre-to-the-node network for Australia on the condition that Telstra did not have to share the network with any of their competitors. If they did have to share it, okay, fair enough: they would just have to make it so ridiculously expensive that no-one could afford it. Contrast this with the recently announced sharing of rail-line infrastructure in the Pilbara.

Sol’s plans did not work. Let us look at his scorecard. While sales are up, Sol promised that costs would be held at 2005 levels. They have risen by eight per cent. He said he would cut thousands of jobs to reach his efficiency targets. He achieved that—10,000 good Australian workers lost their jobs. While pretending to be as nice as pie, he sacked Aussie workers and stripped them of their entitlements. A complacent and weak board led by Donald McGauchie let this happen and even Geoffrey Cousins, who was appointed to the board by the former Prime Minister, John Howard, was complicit in these decisions. Sol promised up to 30 per cent of revenue would come from new products. This is not the case. Net profit is down by 14 per cent. But one statistic he made sure was looked after was his own salary: this increased by 54 per cent.

Sol was one of the worst corporate executives that this country has seen. At the expense of Australian shareholders he travelled the world and stayed in lavish hotels. He was already an obscenely wealthy man, having netted an estimated $70 million to $90 million payout from his former telco job. By all reports he was particularly fussy with his tastes, which had to be catered for. For example, Pepsi Max had to be available at all times, maybe because he was a former board member of PepsiCo, and he even indulged in making sure that there were almonds, bagels, Las Vegas trips, private jets and suites with up to $10,000 a night price tags.

Mr Bradbury interjecting

Mr RANDALL —Absolutely. While local staff lost their jobs, Telstra’s top executives earned $46 million between them in 2008 and lived the lifestyle to match it. Meanwhile, the workers were used, abused and conned. Mr Trujillo’s travelling habits were well known and well reported. Once he defended his travelling habits, ironically just before taking off to Barcelona on his corporate jet to announce a major upgrade to Telstra’s mobile network. How this announcement benefited the people of Barcelona is beyond me and, no doubt, the mum and dad investors of Australia too.

Mr Trujillo pocketed $34 million over his four years at Telstra. Last year he took home a staggering $13.4 million. That is almost $260,000 a week. He stands to pocket $3 million in ‘termination payment’ but his final figure is likely to run into being substantially more when bonuses for the current financial year are calculated this August. The fact that he is to actually receive a termination payment is ludicrous in any case because he resigned and chose to leave before the expiration of his contact. In fact, he was paid three times more than his predecessor, Ziggy Switkowski—so compare the value. Shareholders have every right to be unhappy with his performance. Telstra’s share price fell by 37.8 per cent during his reign.

Despite Mr Trujillo’s protests that the share value holds up against other shares considering the global market, Bloomberg’s data reveal that Telstra shares underperformed the rest of the market by a staggering 18 per cent. When Sol took over, the shares were at $5.06. They opened at $3.08 this morning. They reached a low of $2.96 on 19 March this year. So much for rewarding somebody with a massive corporate salary package for advancing the company! He has actually driven the company, its share price, its profits and its income earnings down.

Sol destroyed relations with both the Howard government and the current government. This had a costly impact on shareholders and the reputation of the once proud national carrier. Under Trujillo, Telstra became no more than another big, bad corporate bully and a corporate thug, showing complete disregard for shareholders, customers, the regulators and the government. This is Trujillo’s legacy.

Never was Telstra’s arrogance more evident than in its token submission for the National Broadband Network under this current government. Owning much of the existing copper network and other infrastructure, Telstra holds complete dominance over the market and continues to push the bounds and to use its advantage—bringing the Minister for Broadband, Communications and the Digital Economy to the brink on this issue. Its lack of effort in its bid for the National Broadband Network caused shockwaves. Its game of chicken with the minister and the government came with a $4.7 billion windfall to Telstra—if it got to build it, obviously. Sol was on a corporate jet out of the country when all the big decisions were being made. In fact, when that decision was being made he was not in Australia. Unlike Optus, who lodged documents and more documents in box after box for their bid, Telstra lodged an insulting 12-page submission. Even a letter from shareholders included in the October 2008 Telstra AGM notice was not enough to tell Telstra to pull him into line. It said that Telstra’s tactics on the NBN tender were ‘increasing the likelihood of negative outcomes for shareholders’. Sol’s claims to be a man who puts customers and shareholders first are as much spin as the current government uses. As we know, Telstra was ruled out of the bid but won a reprieve because the government’s shambolic handling of the process may mean it has an opportunity to inject itself into further negotiations.

It was being rejected from participating in the National Broadband Network that finally showed Sol the door. That day shares fell 11.5 per cent—the largest one-day fall since 1997. His amigos had deserted and soon McGauchie would follow. Sol has still got a job, if only just. After 15 years tenure on the board of the American retail giant, Target, Sol is hanging on by the skin of his teeth. There is a push to unseat him shortly because of his lack of retailing nous.

A poll in the Australian on 27 February, following the Telstra resignation announcement, showed that 69 per cent of people rated his performance as bad—not just average but bad. Trujillo managed to alienate everyone during his reign—shareholders, government, customers and workers. Do not forget when unionised Telstra workers protested after Telstra refused to negotiate on wage increases, causing far-reaching network outages.

Interestingly, last week Mr Trujillo was holed up in what is no doubt a lavish resort in San Diego. Spruiking the wonderful job he had done in Australia at the Future in Review conference, he may have gone a little overboard with his self-praise. Following Sol’s claims that Next G was the envy of the world, one astute investor questioned how Telstra managed to get 21 megabits per second to mobiles when the network in Silicon Valley could get only seven megabytes per second. Sol’s exaggerations were publicly caught out when he had to admit that 21 was the absolute optimum and unfortunately most services operated well below this. He was sprung by a real telecommunications expert. This revealed that his bragging and boasting was all about touting for another lavish executive position—this time probably in the US. The industry and his American peers can see through him, unlike the gullible Telstra board that was fascinated by him.

Telstra’s billing procedures and IT changes pushed calls to the company to unsustainable levels. This is by their own admission. A new cash grab has come in with 30-second billing blocks for STD and overseas calls. Reports indicate that this will increase revenue by tens of millions, costing small business owners and families up to double. Complaints are skyrocketing. In just 90 days earlier this year, Telstra’s complaints increased by 90 per cent. This is no surprise to me as complaints about Telstra and broadband access are among the most common calls to my office. Interestingly, according to the Telecommunications Industry Ombudsman, complaints about Telstra rose by 241 per cent through Mr Trujillo’s reign. Last year, complaints were averaging 250 a day about phone services and over 50 about broadband. These figures will give you some idea about the number of Telstra complaints that come across my desk. I will not go through the examples in detail today but, needless to say, my constituents often call me to seek assistance when they feel as though they are hitting their heads against a brick wall. Fortunately, I have had the great assistance of senior Australian Telstra operatives who have gone to great lengths to see that my constituents’ complaints are rectified. Despite their efforts, it is a testament to the ineffectiveness of Telstra’s procedures that I have had to go to such high levels to have basic administrative and reception complaints rectified.

It was Telstra’s arrogance that ultimately led to the demise of the chairman of the board, Donald McGauchie—along with his unwavering support for Sol. As an editorial in the Australian stated:

Mr McGauchie calculated Mr Trujillo and the gang of American mates would crash through, instead they crashed.

With the rest of the board—Charles Macek, John Stanhope, John Mullen, John Stewart, John Stocker, Peter Willcox, John Zeglis—McGauchie walked Sol’s straight line. Even Geoff Cousins, who the other members did not want on the board, became weak and compliant, focusing much of his attention on the Tasmanian pulp mill rather than the job that he was actually paid for. McGauchie worshipped the ground that Sol walked on. He was instrumental in luring him to Australia in the first place. In the article ‘Who killed McGauchie?’ on 10 May 2009, the Financial Review reported that McGauchie fell on his sword when he was outgunned by Future Fund guardians who said:

The Board of Guardians is focused on seeing value returned to the fund’s Telstra holdings and looks forward to engaging with the new chair and the board.

It was another example of Telstra’s arrogance when the Future Fund board—Telstra’s major shareholder at more than 16 per cent—requested a meeting with the full Telstra board on 30 March. Only McGauchie showed up. That, combined with support for John Stanhope as new CEO, as another import, put the writing on the wall for his future at the company.

Like Sol, Mr McGauchie will not be at a loss after leaving Telstra. He remains on the board of the discredited James Hardie, which has spent $20 million battling the corporate watchdog and has suffered a 44 per cent fall in operating profits. After his failed role in the wharf dispute of 1997, he became a corporate gun for hire, willing to prostitute himself for a fast dollar. McGauchie also sits on the board of Nufarm, as well as having been reappointed to the Reserve Bank by former Treasurer Mr Costello until 2011. I am sure he will not survive after that.

In Canning, my electorate, broadband is a serious issue. I have had many calls, as I have said, about how we can get broadband into the electorate, but time prevents me from continuing on that. All I can say is that, under NBN Mark II, Serpentine, Mundijong, Dwellingup, North Dandalup and Jarrandale will be battling to get the rollout that is being touted.

Finally, the government will now have to deal with the CEO’s replacement, former enterprise executive David Thodey. The real concern is that it is not clear that anything is actually going to change. Mr Thodey has already said on the record that Telstra’s strategy and values are not going to change. Oh, dear—it is the same strategy that got them into this mess to begin with. He recently said that the strategy of differentiation and competing for customers on value that Sol and the whole executive team set for Telstra is not going to change.

While many believe that the incoming chairman, Catherine Livingstone, has seen the results and could not possibly make the same mistakes, one has to wonder. She was a member of the former board and therefore complicit in every poor decision and every bad judgment. I suspect the Future Fund guardians—and not only them but of course every Telstra shareholder in Australia—remain concerned. One can only assume Ms Livingstone played a role or was complicit in the many ill-considered decisions that were made, as I said. She has also said what a good bloke Mr McGauchie was. What hope is there for the future, then? People are questioning Ms Livingstone’s ability to work through the mess she has been left with.

I note today that Sol is complaining that Australia is something of a racist country. The sad irony is that Sol and his amigos brought this focus on themselves by their greed and unnecessary antagonism. In that context I would like to say, as they would say in a good western movie: ‘Adios, gringos; you’ve just been run out of town.’ I hope this draws to a conclusion the worst case of corporate malfeasance that Australia has ever had to endure.

I seek leave to table an email from Mr John Houston.

Leave granted.

Mr RANDALL —Mr Houston is the one who actually encouraged me to take a closer look at Mr Trujillo when he first came to this country. As you will see, the email is dated 2006. To paraphrase, he said he had worked with Mr Trujillo on international telcos. He was the chief operating officer of Orange in Switzerland. He said, basically, ‘Watch this guy; he’s no good.’ So I did, and I watched him carefully. I want to thank Mr Houston for sending me that email. In it he then goes on to explain some of the reasons why he said to watch him. He says, ‘Accordingly, I am glad to see that someone in the government’—this was when we were in government rather than opposition—‘has stood up for the real issues with Telstra now.’ He says that Telstra is in the worst possible leadership hands under Mr Trujillo and his imported team. He finishes by saying: ‘Good on you. Continue to call for his sacking.’ I can say to Mr Houston: your wishes have been delivered. He might not have been sacked but he is gone, and I hope for a new dawn of Telstra in Australia. Seriously, as a Telstra customer myself at home and in my office, I want Telstra to work and be the national carrier, the pre-eminent company in Australia, that it should be. It is there to serve not only corporate Australia but the mums and dads of Australia who want to communicate in the modern age in the most modern way possible. It needs governance. I hope the new board are up to it and the new CEO and the new chair will deliver that professional management. I thank the House.