Revenue risks outlined by Trujillo

An admittance by Sol Trujillo, the CEO of Telstra that if a national broadband network is built by a competitor there will be a long term risk to $2 billion of the company’s revenues.

After the rejection of its high-speed network building proposal by the Federal Government and in a damage limitation attempt, Mr Trujillo rejected analyst estimates that if a network was built by one of its competitors that covered 98 percent of Australia it would stand to lose $4 billion in profits.

Mr Trujillo sent out a veiled threat to both its competitors and the Rudd Government whilst speaking to US investors in Phoenix, Arizona by indicating Telstra’s “other options for providing high-speed broadband”. Its ability to boost its NextG cable and wireless mobile network was something he spoke about.

Mr Trujillo said that there remained “unresolved issues around network operation, information systems and security” and described the plans for a broadband network by the government as a “marginal case”. The national bids left in the race for taxpayer funding of $4.7 billion are from Canada’s Axia NetMedia, Optus and Melbourne’s Acacia following the exclusion of Telstra from the tender process.

He said “All up, in allowing for my mitigation strategies, rational analysis would suggest that at most a mid single-digit percentage of revenues or perhaps $1 billion-$2 billion may be at risk. And even if you build [the planned network], it’s not a guarantee that it’s going to work.”

A recent board meeting in Las Vegas, which happened the coincide with the Consumer Electronics Show, the worlds largest technology fair, saw Donald McGauchie, Telstra’s chairman and Mr Trujillo joining the eight other directors from the company.

The practicalities of using a third party to build a national network had seen “little serious debate in Australia” the chief executive told American investors and went on the emphasise that in the middle of a credit crunch it was “not clear” that bidders had “material financial backing” He said “The magnitude of the task is huge … Any alternative builder is going to be very challenged.”