The interim decision by the Australian Competition and Consumer Commission follows Telstra’s decision to scrap plans to build a new fiber-optic network in the country at a cost of AUD 3.1bn ($2.36bn), after it failed to reach agreement over allowing competitors access to the new network.
Now the ACCC has imposed a number of changes to the various Telstra charges for access to its network copper phone lines, following an unnamed rival lodging a compliant earlier this year.
The most significant change is the access price for Band 2, or suburban areas. The ACCC has said that Telstra must charge AUD 17.70 ($13.44) for rivals to access the network. Telstra is currently charging an access fee of AUD 22 ($16.71).
Telstra’s ADS shares on the New York Stock Exchange fell 2.10% to $14.01 as the market absorbed the implications of this change. Band 2 is the most important band, because it is the band with the most customers.
According to Reuters, Telstra responded to the decision by saying the ruling only applied to one low volume customer and was only an interim decision.
The ACCC also made changes to the other bands, with Band 1 (CBD, Central Business District) being reduced from AUD 13 ($9.87) to AUD 7.20 ($5.46). Band 3, which is the regional band, has also been reduced to AUD 34.20 ($25.97).
It remains to be seen what these changes will have on the long-term at the Melbourne-based carrier. There is speculation that the new charges will effect Telstra’s dividends payments, which will likely have to be cut.
The implication of this, is that it would make Australia’s largest telecoms carrier less attractive for potential investors, which is important as the Australian government is looking to raise AUD 25bn ($19.1bn) if it sells off its remaining 51.8% in the carrier. A decision of the Government sell-off is expected during the next few weeks.
Telstra’s combative American CEO Sol Trujillo has made few friends with the regulator and the Australian government, and he has previously warned that the burden of complying with the regulator is destroying the carrier’s value.
Telstra recently announced a net profit of AUD 3.18bn ($2.41bn) for the financial year ended 30 June 2006, down 26.2% on the prior year. It was the carrier’s worse profit in nine years. Sales rose modestly to AUD 22.83bn($17.35bn) from AUD 22.26bn ($16.91bn) in 2005.