Telstra to be split?

Talk about Telstra has died down in the media somewhat, nearing almost a year since the company became completely private. Much less bad press has been written in this past year, apart from shareholders voicing concerns over growth in its share price and company value.

It seems odd to me that the government is only now interesting breaking up Telstra, post-privatisation. Talk has been pushed on to the Australian government by a New Zealand government decision to break up its big telecommunications player, Telecom NZ. The idea of breaking Telstra into three different units is not a new one, and has been discussed for as long as its public listing. Whether the government is actually serious or not is another question, but if they are, you would have to say that a serious lack of judgement in the 3rd installment float took place. Uprooting companies again after making some major changes not too long ago seems counterproductive to all stakeholders, at least in the short term. Just to be clear, I don’t mind the idea of a break up on the surface, but the reality is, this isn’t like carving a cake; there’s a huge administration and teething process that would go on, and its not like anyone could blame Telstra shareholders for losing patience with both the company and the government.

Money quote:
Macquarie Equities analyst Andrew Levy said a break-up would be a negative for Telstra, but not devastating, with the biggest impact likely to be on the firm’s five-year overhaul plan.

“With Telstra running flat chat to meet tough deadlines, imposing operational separation on the company may well lead to management putting back key deadlines,” he told clients.

Pushing back key deadlines doesn’t incense investors with optimism about growth prospects.