Telstra, Is It Time To Bring Back Sol Trujillo and The Three Amigo’s

Telstra is a mess, and the man whose head could be on the chopping block is CEO Andy Penn who is definitely no Sol Trujillo.

With the Company set to invest in a new multi-billion-dollar 5G network the question now is whether Penn and his management team actually the skills have needed to deliver the revenue streams that will reverse Telstra’s fortunes.

At a management level Telstra is well known for churning through personnel now they are facing renewed pressure to cut costs and people even further in an effort to stay competitive.

Morgan Stanley analysts argued on Wednesday that Telstra’s falling share price could be arrested and reversed if it implemented a “significantly larger,” cost-cutting program to remove more than $500 million from its annual operating expenditure.

The analysts argued that Telstra’s cost of goods sold comprised a larger proportion of its revenue than many foreign telcos, a point likely to be taken up by investors keen for the telco to act more decisively to protect its bottom from intense mobile phone competition and a squeeze on internet margins caused by the rollout of the National Broadband Network.

What Penn is living off is the work done by former Telstra executives Sol Trujillo, and his imports, dubbed the three amigos, they included Greg Winn the former chief operating officer and the likes of Phil Burgess the former head of Telstra’s communications and regulatory department who in effect became the second most powerful executive at Telstra.

They had a business plan and they drove it. They built Telstra’s 4G network, they restructured Telstra’s billing system. Then along came David Thodey who restructured Telstra customers service operation.

Under Penn there is no clear business plan in place and above no upstream revenue generators.

He is dabbling at the edges in an effort to work out where his future revenues are set to come from.

Will it be 5G entertainment and gaming or taking a share of the home market where in the future doctors will be using high speed fibre networks to consult with patents in their homes.

In the smartphone market he has not worked out how to stop margin erosion, or the loss of smartphone sales to retailers and online operators.
His PR staff which under Burgess were a tight controlled unit are today more a rabble desperately looking for “positive spin stories” than laying out a focused business plan for their boss.

Burgess and Sol Trujillo were especially prominent when they took on the Federal Government back in 2005 in their attempts to seek regulatory relief for Telstra, who at the time were watching its traditional phone line monopoly being shredded by the competition.

Now it’s their smartphone business that is being shredded.

“Some of these regulations that are being proposed will destroy shareholder value,” Mr Burgess told me back in 2005.

He had previously warned that Mr Trujillo could be left with no option but to split Telstra and sell off the pieces.

This was a tough talking team who knew where they wanted to go.

What they delivered is what Penn has been living off up until now.

Morgan Stanley said Telstra delivered operating expenditure of 35 per cent of its total sales in the 2017 financial year, in comparison to 32 per cent at Optus and a 27 per cent global average rate, where Deutsche Telekom scored lowest at 19 per cent.

Cutting costs is one thing having a clear forward business plan is another and this is what Penn and his current management is struggling with.

As for Sol Trujillo he signed on to be a director at the fast-growing Lachlan Murdoch-backed telecommunications and advertising technology start-up Unlockd.

Maybe it’s time to bring him back as he did build the network that has been responsible for delivering 10 years of Telstra growth.

Competition has intensified across Telstra’s core businesses and the company now has had to accept lower margins as a means of protecting its dominant market share claim analysts.

Charging premium pricing is a thing of the past at Telstra as all carriers will have a 5G network. The brand is also under threat due to constant network failures. This is driving consumers into the arms of their competitors at a time when they can least afford it.

Its losing fixed line internet revenues to the NBN, S&P and their vulnerability to an erosion of its price premium and dominant mobile market share is clearly evident.

Maybe Telstra should have a talk to their Foxtel partner News Corp they at least have a telephone number for Sol Trujillo.