Worst of all possible worlds: Telstuffed

Let’s see: the Government has an on-going conflict in regulating Telstra because doing so properly harms Telstra’s profits which harms its short-term share value; something the Government doesn’t want to do because it wants to sell it off. But the Government does have a controlling interest in the company and so can, if it wants, control it. So to resolve the conflict, what does it do? Lose the controlling interest but keep enough of a financial one so that the on-going conflict remains. In the process, it loses its long-term ability to manage the structure of Telstra in a way that could compensate existing shareholders.

What goes out the door? We get none of the benefits of privatisation — ability to regulate without a conflict and the ability to change management without political interference — and all of the costs — assets sold at a low share value, a gaping hole for regional Australia and no opportunity for structural change to resolve the whole mess. Heavy sigh.

2 thoughts on “Worst of all possible worlds: Telstuffed”

Comments are closed.