Telstra split prospects grow

The war of words between federal Communications Minister Helen Coonan and Telstra has escalated after the minister told the telco that it could be forced to split its retail and wholesale operations.

Coonan has reportedly told Telstra’s board that it should consider voluntarily splitting its operations or face involuntary structural separation at some point in the near future.

It remains unclear, however, whether Coonan’s comments reflect the actual policy intention of the Government or simply an attempt to land a punch in its unprecedented public relation stoush with Telstra.

Coonan has effectively admitted that Telstra’s belligerent behaviour is the reason for the new direction of her rhetoric, telling The Australian that “it was really after the American management got in the saddle here, and Telstra started its aggressive engagement that the notion of looking at a more robust form of structural separation came about”.

Although many commentators agree that it will be difficult to build a truly competitive telecommunications sector in Australia without the structural separation of Telstra, there are formidable hurdles in the way of such a move.

The key issue? How Telstra’s 1.6 million shareholders, all of whom bought shares in the integrated company, will be compensated for any loss of value as a consequence of a split.

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