.
TELSTRA
BELONGS TO THE AUSTRALIAN PEOPLE
The
following statement by Peter Davis, Mayor of the City of Port Lincoln is a real
shot in the arm for those Australians concerned that governments of all
‘economic rationalist’ persuasions are selling off the peoples’ assets...
without the peoples’ agreement.
With
the 2004 electoral win, and control of the Senate, there is no doubt the Liberal
Party will push for the full privatisation of Telstra... the last SIGNIFICANT
piece of national infrastructure built and paid for by the people of Australia.
If
we are to defend Telstra we need to consider how it evolved, what the Company
is, and what it delivers.
Present
day Telstra is an inheritance from the old Post Master-General’s Department,
later “Australia Post,” and
corporatised and set up as a Public Company in the mid 90’s.
“Telstra”
is a reflection of Government’s fundamental role of providing the National
infrastructure for the health, welfare, prosperity, and safety of the people of
Australia.
Thus,
in times past we had Governments that built roads, ports, airports, schools,
police forces, medical services, education facilities and so on. Each of these
Government instrumentalities functioned as separate DEPARTMENTS. Thus the
infrastructure of our nation developed. Modern day Telstra is nothing more than
the evolution of the old Post Master General’s Department that delivered
communication services to Australia.
Telstra
today is a huge company by any standards… share capital, employees, tax paid,
dividend streams or services delivered. It delivers huge national benefits
because it is not totally focused upon maximising profit... YET! It is still
required to deliver services to the bush as a consequence of its origins as a
Government Department providing services for all Australians.
Some
idea of its size can be gauged by a comparison with icon Australian companies.
| |
TELSTRA |
NBA |
CBA |
BHP |
WOOLWORTHS |
| Issued
shares |
12.6
billion |
1.5
billion |
1.26
billion |
4.25
billion
|
1.02
billion |
| Share
price |
$4.65 |
$27.25 |
$31.40 |
$13.75 |
$13.60 |
| Net
profit |
4.15
$billion |
3.77
$billion |
1.97
$billion |
-2.3
$billion |
687
$million |
| Tax
paid |
1.73
$billion |
1.27
$billion |
636
$million |
-7.6
$million |
193
$million |
| Dividend/Share |
26c |
163c |
183c |
26c |
45c |
| Employees |
40,000 |
42,500 |
36,300 |
35,000 |
78,000 |
The
Government owns 51% or 6.5 million shares, which, at $5-00 per share, values the
people of Australia’s holding at approximately $32,000 million.
Government
has consistently argued that it will sell Telstra so the company can function as
a fully operational Public Company without Government constraints. But
Government will not undertake the sell off until it is satisfied that Telstra is
delivering services to rural Australia that are comparable with urban service
delivery. It is this current under performing rural service that is delaying the
complete privatisation of Telstra.
The
reasons put forward to sell Telstra are:
-
REDUCTION
OF NATIONAL DEBT
Because
of the massive sale of various other national assets, together with heavy
taxation in recent years, the Federal share of 'National Debt' is now small,
declining and no longer of major consequence.
However,
even if Government debt is an issue, the revenue streams flowing from Telstra
show the short-term benefit of gaining $32,000 million to be outweighed by
long term benefits. If debt servicing is an issue, the combined dividend and
taxation stream flowing to the Government, (Currently $3,400 million and
RISING RAPIDLY), far outweighs the short term expediency of selling the asset.
Telstra is currently returning in excess of 12% annually to Government. It
does not require much intelligence to see the long-term cash flow from Telstra
will massively exceed any short-term debt servicing benefit.
-
SALE
REVENUE SHOULD BE USED TO RESTORE THE ENVIRONMENT.
There
is no doubt the Australian people are concerned about our deteriorating
ecosystems and want Government action. The “Save the Murray” campaign is
used as an issue that could be funded by Telstra sale revenue. The sum of
$1,500 million to be committed over 5 years has been set as the desired target
by Federal and State Governments.
Government
could dedicate part of its annual dividend stream to assist the environment.
Say $500 million for three years or $300 million over five years would achieve
the current objective together with retention of the people’s asset and the
continuing cash flow into the future.
The
dividend stream could be committed to solving our environmental issues…. It
is obvious that some $1,700 million is available ANNUALLY….
As compared with the proposal to commit $1,500 million over 5 years
from various Governments via taxation and “environmental levies”.
“Save the Murray” levy is a good example. Another is the soon to be
introduced “Natural Resource Management Levy.”
-
GOVERNMENT
CLAIMS INFORMATION TECHNOLOGY SERVICE PROVISION HAS IMPROVED AS A RESULT OF
PARTIAL PRIVATISATION OF TELSTRA.
This
is a straight lie. The reason information technology service provision has
improved is a result of technology: NOT PRIVATISATION. Cables and telephone
poles are ancient history. The Broad Band Internet revolution and mobile phone
technology are not a result of partially privatising Telstra.
-
GOVERNMENT
SHOULD NOT BE INVOLVED WITHIN A PUBLIC COMPANY.
Both
the Telstra Board
and Government argue that each is constrained and unable to function
efficiently due to the majority shareholding of the Federal Government. This
smokescreen can be solved by Government selling off, say 2%, of its
shareholding to retain just under 50% of the capital.
The
combined value of the two revenue streams flowing to Government from Telstra is
$3,400 million and rising annually. Government receives dividends and taxation.
Government’s dividend stream, in particular, is rising rapidly due to two
influences: Last year’s $1,000 million public share buyback increased the
Government shareholding from 50.1% to 51%. Similarly, the current buy back will
further increase Government ownership to approximately 51.8%. The Board of
Telstra has a current, declared, policy of significantly increasing shareholder
returns over the foreseeable future by further share buy backs and dividend
increases.
The
$1,7000 million taxation stream flowing to Government is clearly government
revenue in the same way that government receives taxation from us as
individuals.
The
fundamental purpose of an elected Government is to provide the necessary
infrastructure for people to live happy, healthy and prosperous lives in a safe
environment. Thus Governments have built roads, ports, schools, hospitals,
bridges, rubbish dumps and, over the years, our postal and telecommunications
infrastructure. Thus, the old Post Master General’s Department, later
Australia Post and Telecom.
We,
the people, need to remind our elected members of the fundamental responsibility
of Government: to deliver infrastructure for the whole nation to live happily,
healthily, prosperously and safely.
The
original 49.9% shareholding should NEVER have been sold.
Telstra
has openly stated that it will not build and operate infrastructure where it
cannot generate satisfactory returns on its investment. Thus, small, outlying
rural communities and isolated regions will never have telecommunication
services the majority of Australians take for granted.
It
is important to remember the colossal returns Telstra is generating from its
urban investments.
Telstra’s
stated rate of return on capital is currently 26.8%. There are few public
Companies and very few farmers who can match this rate of return on capital. To
use current rates of return from Telstra’s very profitable urban
infrastructure as the yardstick for rural investment is to guarantee that rural
infrastructure will never be built. It is commonsense. Thus, we see the
difficulties of outback Queensland, or small communities living in electronic
“dead spots” that require specific telecommunications equipment. Telstra has
consistently stated it will not invest where there are lower, poor, investment
returns on equity.
Government
has stated it will not sell Telstra until all Australians have comparable
service irrespective of location. If Government is genuine about comparable
service, it is not difficult to give all Australia good telecommunication
services.
An
annual allocation from the Government DIVIDEND stream would achieve instant
results. Let us allocate say, $50 million annually, to building towers or
infrastructure. Let us accept that an average telecommunication tower costs
$300,000. Some 100 towers would appear annually and the dividend stream would
fall to $1,650 million.
Or,
alternatively, perhaps Telstra might consider investing $50 million annually in
unprofitable regional infrastructure? When one considers the thousands of
$millions that Telstra has recently invested in buying other businesses, paying
down long term debt, buying back shares or in poor investments, $50 million
annually is little more than beer money.
What
has Telstra spent in the last couple of years? It has:
Effectively,
Telstra has generated internal revenues that paid for $5,000 million of
investment in the last two years on top of the $10,000 millions of tax and
dividends!
Of
this $10,000 million, the Commonwealth Government has received $6,600 million.
Yet
Telstra maintains it is unable to invest in rural Australia and Government
refuses to invest some of it’s own colossal revenues to carry out its elected
responsibilities.
Let
us presume that Telstra does upgrade CURRENT poor services to outback Australia
as required by the Federal Government and the sale of Telstra occurs.
How
will Federal Government guarantee future rural information services when the
next quantum leap in technology occurs as is predicted in Messrs McGauchie’s
and Switkowski’s own annual report when the Board has consistently
demonstrated and states it will not invest in poor investment returns?
It
is obvious a fully privatised Telstra will deliver declining information
technology services to rural Australia. The Board’s own stated investment
criteria guarantee declining levels of investment in unprofitable locations.
We
should ask ourselves why has America required the full sale of Telstra as part
of the soon to be signed Free Trade Agreement? The above financial statistics
are the reasons. America desires the colossal cash flow. Even by American
standards, Telstra is a magnificent investment, a huge cash cow. Telstra
delivers returns comparable with the banking industry.
What
will happen to Australian tax payers if Telstra is fully privatised? Clearly,
Government will lose its current taxation and dividend streams. Some of those
monies will go overseas, some will go into Superannuation plans and so on. A
majority of the current $3,400 millions of annual taxes and dividends will not
remain in Australian Government control. The inevitable result MUST be that
Government will need to replace the lost $3,400 millions with increased taxation
of our people.
The
best summary of Telstra’s attitude to meeting its core responsibilities
can be gained from the two closing paragraphs
of Telstra’s own CONCISE ANNUAL REVIEW, 2004 report:
QUOTE:
“We
expect to grow revenues faster than expenses. This will require sharp
improvements in productivity across the Company to permit investment in new
capabilities and technologies. Telstra’s capital expenditure levels will
remain around $3,000 million per annum over the medium term”
“What
will these initiatives deliver to our shareholders? Three things - revenue
growth, attractive margins and strong cash flows - which will combine to
support an active capital management program and attractive returns to
shareholders.”
END
QUOTE.
What
will these initiatives deliver rural Australians? The only possible outcome will
be deteriorating services and inadequate infrastructure. We will never get the
message any clearer than the above
statement by the Chairman and CEO of Telstra. Telstra is clearly stating it will
never invest in service provision. It will invest to maximise profit only. We
have been warned.
We
MUST preserve Telstra... as Telstra is the Governments' responsibility in provid
information and communication services to all Australians.
THERE
IS ONLY ONE WAY TO PREVENT THE TELSTRA SALE.
Under
the Federal Constitution each of our States is represented by 12 Senators. The
reason for this equality is so that each State Government can use its Senators
to block legislation that they feel is not in the interests of their State
population. Nowhere within our Constitution is there any mention of the party-political
system now enforced on us... particularly in the Senate.
It
is beyond dispute the overwhelming majority of Australian people want to keep
Telstra as a taxpayer-owned asset.
The
only way to ensure this objective is for our State Parliaments to require their
elected Senators to vote against the sale.
RECOMMENDATION:
That
the provincial cities * associations seek the support of the Australian Local
Government Association to approach the Premiers of each State and DEMAND that
their respective Senators OPPOSE any further sale of Telstra shares, whose real
ownership is Australia's taxpayers... not the party
politicians that form the current Federal government.
*
(Example:
Local Government Association of Queensland)
