Trujillo keeps up strategy of challenge

Sol Trujillo arrived in Australia a year ago to take over as chief executive of Telstra. He had an impressive track record in telecoms but was an outsider, an American, taking charge of one the country’s iconic companies.

Today, the former boss of US West and Orange is one of Australia’s best-known executives, regularly making the headlines – but not always for the right reasons.

As head of an incumbent operator majority-controlled by the government and with a 1.6m-strong army of retail shareholders, Mr Trujillo has brought a combative, no-nonsense leadership style that has ruffled feathers.

He has fought a battle with the Australian competition regulator, culminating in his decision this week to scrap Telstra’s flagship broadband project because of the regulatory conflict.

Mr Trujillo argues that such tensions are the price to pay for what he hopes will be the complete overhaul of a former phone monopoly that is having to respond to huge competitive and technological challenges. “A transformation means doing the tough things. There is always a point when people don’t like change.”

He also maintains that investors should “partition” between his progress within the company in implementing the first steps of his five-year reorganisation plan and his more visible fight to change what he claims is an outdated regulatory and political environment, which he holds responsible for destroying shareholder value. “If you look inside the company operationally, the change is going very well. The part that I would have to candidly admit isn’t going very well is the regulatory, external, government kinds of things, where there is a need for change. But I don’t want people confused and thinking that this slows down what we do operationally, because it doesn’t.”

He contrasts the situation faced by Telstra as a government-controlled group with the support given by Angela Merkel, the German chancellor, to Deutsche Telekom’s fibre broadband network, as well as his experience in France as head of Orange. “There were a lot of collaborative steps taken between France Telecom and the French government because they saw it as value-creating for investors and important for the French community.

“In Australia, the situation looks different. If you are an investor, you want to see value go up and you don’t want to see it go down. That was an assumption I had, but it may not always be the case,” he says.

Mr Trujillo is irritated by suggestions that Telstra’s regulatory battle, as well as lack of clarity about its future dividend policy, are creating further tensions with the government as Canberra nears its decision on whether to sell its remaining stake in Telstra.

He insists such suggestions are “absolutely incorrect” and there is a “good working relationship with the government”.

Should the sale go ahead, most analysts expect it will be aimed at institutional rather than retail investors. Asked whether his job would be complicated if investment banks or private equity groups took over part of the government’s holding, he says: “Whoever the investors are, they have to be comfortable with the strategy. Otherwise they would be at odds with the rest of the shareholder base. There are some who may have misalignments, and those could be problematic, but I don’t know who they are, who is interested and who the government is talking to.’’

This month, Mr Trujillo once more grabbed the media spotlight after US filings showed he had walked away from US West with a $72m golden handshake.

So money is not what attracted him to Telstra. “I saw an incredible opportunity to transform this big portfolio of assets, break down all these walls and create an integrated company,” he says. “That has been a challenging venture.”