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Forget About Growth At Telstra It’s All Hands On Deck To Protect The CEO’s Salary

It’s not only consumers that are fed up with Telstra now shareholders have turned on the giant telco over the amount of money paid to executives who are struggling to come up with any form of tangible growth plans.

Yesterday Telstra Chairman John Mullen, appeared to be more interested in rationalising a reason to keep paying multimillion-dollar salaries to Telstra executives, he spent nearly a third of his speech (3½ pages in an 11½-page speech) at the annual meeting in Sydney yesterday addressing the issue of salaries.

As for the annual report just one page was devoted to the outlook for the company and two on the risk factors, versus 23 for the remuneration report which got a record 62 per cent “No” vote.

As one attendee quipped “They don’t have a plan or a future at this stage”.

As consumer complaints rise, and with Telstra facing a looming TPG-Vodafone merger the PR hacks at Telstra are now spruiking the possibility of Telstra buying the NBN.

Poor old CEO Andy Penn is now down to a base $4.5m salary as he sits back working out how to sack thousands of employees so that he can justify this salary.

Another issue that bit the dust yesterday was Telstra’s aspiration to remould itself as a technology company.

In the past Telstra executives have said they were set to dominate B2b cloud services health services and numerous other categories. These plans have all come to nothing and their “Telstra 2022” strategic overhaul appears to already be wobbling with no certainty that it will deliver share price performance for investors.

Then there is the looming NBN-induced $3 billion hit to the telco’s earnings. Analysts believe that Telstra has its work cut out becoming lean enough to make do with shrinking margins.

“We are losing a large amount of earnings and that affects dividends and share price,” Mr Mullen said yesterday.

“We have to protect our balance sheet. We are an A-rated company and believe it’s critically important that we retain that rating at a time when there’s so much disruption in the industry.”

There was also a startling concession from Mr Mullen, who said Telstra had underestimated just how much damage the NBN would wreak on its earnings.

“The NBN was announced almost 11 years ago. However, at that time we had no idea of what the economics of the NBN would do to us,” he said. “We actually thought until about three years ago there would still be a reasonable profit margin to be made as a reseller of the NBN service.” That misconception has come back to haunt Telstra.