An earlier post outlined how regulators in Australia would require Telstra to agree to a functional separation of its network and retail operations. This post is an attempt to explain how a shifting regulatory environment is forcing major changes for Australia’s incumbent operator. Later this week, another post on Telstra will highlight a recent court verdict which forms the basis for why funtional separation is an unavoidable reality for network operators like FINTEL.

Leadership at telecom operators around the Pacific would be wise to look at the situation Telstra finds itself in down under. The Australian, reports on what can only be described as an implosion. Telstra finds itself battling government regulators, trying to piece together a functioning board of directors, selecting a successor

Telstra comes under attack on many fronts

Telstra comes under attack on many fronts

for a very controversial CEO who has been sent packing, and in the latest development, likely prospect of a shareholder revolt.

Under the confrontational leadership style of CEO Sol Trujillo, the company has for years bristled at what they called burdensome government regulation. At times, this has resulted in Telstra carrying out a quite vocal campaign against Canberra. The aggressive stance of the company under the Trujillo-era culminated in the recent exclusion of Telstra’s bid to tender for construction of a national fiber network and the government opting to go the process under its aegis.

The move has resulted in a $15 billion hit to Telstra’s value, the pushing out the door of Trujillo, and calls for reshuffling of the board, as early as this week. Sensing the shifting tide of the regulatory environment and Canberra’s attitude, shareholders no longer find appealing the notion of antagonizing government further with loud anti-regulation PR campaigns and are demanding a change in leadership and style.

Sol Trujillo (pictured) put in place Telstra's confrontational style of leadership

Sol Trujillo (pictured) was the key proponent of Telstra's confrontational style of leadership

All of this is happening because government’s are reconsidering their approaches to regulation. Under facilities-based competition policy, they were comfortable sitting on the sidelines. Failure to see desired outcomes such as competition in deployment of new networks, combined with a global downturn resulting in companies spending less to deploy new infrastructure, has forced governments from the sidelines onto the pitch.

Telstra’s implosion is the story of a company blinded by arrogance. The hall of mirrors which leaders used to construct a false image of the company’s health has shattered as they now face battles on major fronts.

For operators in the Pacific, the lessons are to avoid antagonizing regulators, pick level-headed leadership, and strike a more cooperative tone with government. Not doing so might result in ending up in the mess that Telstra is in today.