Telstra privatisation

March 11, 1998

Telstra privatisation

Following Telstra CEO Frank Blount's announcement, several weeks ago, of a record interim profit of $1.6 billion, PM John Howard and treasurer Peter Costello have been talking up their plan to fully privatise the profitable telecommunications company.

According to Costello, there is "no particular logic" in the government owning two-thirds and the "general public" one-third; he implied that such a situation discriminated against the 1.6 million shareholders.

In fact, while many people, including Telstra employees, did buy Telstra shares, a large portion was gobbled up corporate interests. It is the latter's interests the government is most concerned about in the lead-up to an election.

With tax hikes a rather difficult election policy to popularise, the government is hoping that another chance to buy Telstra shares will appeal to the "mums and dads of Australia".

However, this means it has to obscure the real costs of privatisation. As the sell-off British and New Zealand Telecom showed, these include millions wasted on advertising campaigns, in commissions and fees to financiers; corporate interests made windfall profits from trading undervalued shares, and managers gave themselves massive salary hikes.

The government's arguments have centred on the need for "efficiency". However, as the failure of the privatised Mercury Energy to provide Auckland's CBD with power so starkly shows, "efficiency" means nothing more than putting profits before people's needs.

The Thatcherite idea of a "people's capitalism" is also a myth. While shareholders receive a few extra dollars in dividends each year, this will be well and truly swallowed up in the corresponding tax hike, which will result, in part, from the fact that Telstra's profits no longer flow into general revenue.

A fully privatised Telstra will mean that services to less profitable areas (such as rural Australia) will be cut, and remaining services streamlined to the more profitable business sectors.

The other major impact of the Telstra sell-off will be a dramatic loss of jobs. Blount put it candidly when first appointed to the job: he was hired, he said, to prepare Telecom for privatisation. Rob Cartwright, who cut his teeth with the union-busting company CRA, was recruited as Telstra's "human resources manager", and has overseen the sacking of some 18,000 people from Telstra's work force of 77,000, with another 7500 jobs to go by July.

Telstra employees have been offered interest-free loans, 4-for-1 share offers and free shares in an effort to convince them that they have a stake in privatisation. Cartwright says this has been successful; employees' shareholdings in Telstra are "now their biggest investment after the home and the car".

But a handful of shares is poor consolation for loss of a job. Sacked Telstra workers won't be able to live on dividends — though those dividends might well deprive them of the dole.

While the Community and Public Sector Union leaders nominally opposed the part-privatisation of Telstra, they ended up supporting an enterprise agreement which fitted with Telstra's "business plan objectives". Similarly, the Communications, Electrical and Plumbing Union, which initiated a promising-looking campaign in 1996, was unable to drive it forward, in part due to the indifference of other unions.

The other major factor in the failure of the "Keep Telstra in public hands" campaign was the lack of interest in it from the ACTU and the ALP, both of which have fallen back on economic nationalist arguments to cover for their lack of resolve to mobilise workers in defence of the public sector.

This time around, opposition leader Kim Beazley has said (rather quietly) he doesn't believe there are any benefits to be had in the full privatisation of Telstra.

But is he going to do any more than this? Don't hold your breath. Labor is too preoccupied with re-winning support from the Coalition to campaign around an important issue of principle. And anyway, who would believe them if they did campaign, after having sold off Qantas, the Commonwealth Bank and the Commonwealth Serum Laboratories and after Bob Carr's ongoing attempts to sell off the NSW electricity industry?

The only way jobs and services will be maintained is if Telstra is made really accountable to the public. The only way to do this would be to renationalise the third of Telstra which has already been privatised (which would involve compensation for small investors), and replace CEOs and "managers" on grossly inflated salaries with a democratically elected board of management from those with the most experience — the workers themselves.

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