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Telstra, Australia’s dominant telecommunications group, on Thursday launched a blistering attack on the country’s regulatory regime, scuppering hopes it might take a more conciliatory approach that would ease its full privatisation.

In a nationally televised address to mark his first year at the group, Sol Trujillo, Telstra’s combative American chief executive, said Australia was in danger of missing out on vital investments in its communications networks because of its mindless regulators.

“This is an investment that is well and truly in Australia’s national interest,” Mr Trujillo said of Telstra’s plans to invest up to A$4bn (US$2.9bn) on a high-speed fibre broadband network. “And we cannot afford to let this opportunity pass because of a mindless continuation of a regulatory regime that is past its use-by date.”

Although most analysts support Mr Trujillo’s long-term strategic vision for Telstra, his 12 months in Australia have been controversial, partly because of his confrontational approach and because of the risks involved in his ambitious investment plans for the group.

His comments come as Telstra is locked in negotiations with the competition regulator over the terms of access by its rivals to the planned fibre network. The government has delayed a final decision on whether to proceed with the A$24bn sale of its remaining 51.8 per cent stake in Telstra to give the two sides more time to resolve their differences.

While analysts say a definitive agreement ahead of a planned sale in October or November is no longer possible because of the lengthy appeal process, it is still hoped that Telstra can come up with a blueprint acceptable to the regulator in the interim.

But Mr Trujillo repeated threats to abort the plans for a fibre network and talked up the wireless alternatives, saying that these also had the benefit of being unregulated.

“We will not invest in fibre to the node unless we achieve regulatory settings that will permit Telstra’s 1.6m shareholders to earn a competitive return,” he said. “Standing up for the shareholder is not rhetoric. It is a principle of leadership and management.”

Although Telstra’s full privatisation is a long-standing government objective, analysts said it was likely to stand firm on regulation.

Telstra, one of the last incumbent telecommunications companies in the industrialised world to be privatised, retains a dominant position in many segments of the market and also controls valuable media assets.

“The government was taken aback by Sol Trujillo’s behaviour in the beginning. Telstra will have to accept change because the government is not going to give in to its bullying,” said Paul Budde, an independent telecoms analyst.

“No one is questioning its right to earn competitive returns but there also has to be a return on investment for the nation,” he added.

Despite the difficult regulatory negotiations, the government – which is not reliant on Telstra receipts because it has already eliminated its debt – is still exploring options to boost the sale’s appeal, following a 50 per cent decline in the group’s share price since its secondary offering in 1999.

Analysts say it might, for example, again allow investors to pay in instalments while receiving the full dividend upfront or reduce the size of the offering by placing some of its stake in a public sector pension fund.

Copyright The Financial Times Limited 2019. All rights reserved.

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