Australian minister rules out Telstra break-up

Von Julian Bajkowski

Australian communications minister Senator Helen Coonan has ruled out the break-up and individual sale of Telstra Corp. Ltd."s different business divisions as part of the government"s forthcoming sale of the telecommunications carrier.

Addressing the Australian Telecommunications Users Group annual conference earlier Wednesday, Coonan said advocates of "structural separation" -- or selling off Telstra"s mobile, telephony, Internet, infrastructure and directories business -- had failed to prove their economic case and risked sending regional telecommunications back to "the dark ages".

"What I have ruled out is the government interfering and forcing structural separation in Telstra," Coonan said, adding the government"s preferred way forward was to allow Telstra the opportunity to reform itself by way of "operational separation".

"It is a very different matter to taking a regulatory sledgehammer to Telstra and splitting it up and slicing it and dicing it without knowing what outcomes will be achieved by it."

In plain terms operational separation would allow regulatory Chinese walls to be built around Telstra"s wholesale and retail divisions to prevent Telstra gaining unfair advantage.

Coonan said she would like to see Telstra design the model under which this would occur and pointed to British Telecom"s recent sell-off as a potential way forward.

"What I want to do is work with Telstra see if we can get greater transparency in operational separation. I am talking about operational separation of divisions of Telstra so that there is greater transparency between how their retail and wholesale divisions operate," she said.

"The issues that have been identified by the people that call for structural reform can be dealt with far more effectively without that kind of draconian intervention by government."

To achieve this end, Coonan advocated a kind of consultative period where selected industry and community representatives would be invited to guide the government on a framework of safeguards - but backed away from committing to a public inquiry.

"I don"t know that [a public inquiry] would really be the kind of inquiry that will produce the kind of targeted information that we need to be able shape the kind of responses that we need to look at. We know the kind of questions we need to ask and I have outlined those issues pretty clearly," Coonan said.

Coonan said the government expects to finalize conclusive plans for the sale of Telstra by the end of 2005.