The following media release from the City of Port Lincoln is a real shot in the arm for those Australians concerned that governments of all 'economic rationalist' persuasions are selling off the Peoples' assets without the Peoples' agreement.
With the recent electoral win and control of the Senate there is no doubt the Liberal Party will push for the full privatisation of Telstra; the last SIGNIFICANT piece of national infrastructure built and paid for by the people of Australia.

If we are to defend Telstra we need to consider how it evolved, what the Company is, and what it delivers.

Present day Telstra is an inheritance from the old Post Master-General's Department, later "Australia Post," and corporatised and set up as a Public Company in the mid 90's.

"Telstra" is a reflection of Government's fundamental role of providing the National infrastructure for the health, welfare, prosperity, and safety of the people of Australia.
Thus, in times past we had Governments that built roads, ports, airports, schools, police forces, medical services, education facilities and so on. Each of these Government instrumentalities functioned as separate DEPARTMENTS. Thus the infrastructure of our nation developed. Modern day Telstra is nothing more than the evolution of the old Post Master General's Department that delivered communication services to Australia.

Telstra today is a huge company by any standards…Share capital, employees, tax paid, dividend streams or services delivered. It delivers huge National benefits because it is not totally focused upon maximising profit…YET! It is still required to deliver services to the bush as a consequence of its origins as a Government Department providing services for all Australians.

Some idea of its size can be gauged by a comparison with icon Australian companies.

The Government owns 51% or 6.5 billion shares, which, at $5-00 per share, values the people of Australia's holding at approximately $32 billion.

Government has consistently argued that it will sell Telstra so the company can function as a fully operational Public Company without Government constraints. But Government will not undertake the sell off until it is satisfied that Telstra is delivering services to rural Australia that are comparable with urban service delivery. It is this current under performing rural service that is delaying the complete privatisation of Telstra.

The reasons put forward to sell Telstra are:

1: REDUCTION OF NATIONAL DEBT
Because of the massive sale of various other national assets together with heavy taxation in recent years, the Federal share of National Debt is now small, declining and no longer of major consequence.

However, even if Government debt is an issue, the revenue streams flowing from Telstra show the short-term benefit of gaining $32 billion to be outweighed by long term benefits. IF DEBT SERVICING IS AN ISSUE, THE COMBINED DIVIDEND AND TAXATION STREAM FLOWING TO GOVERNMENT, [CURRENTLY $3.4BILLION AND RISING RAPIDLY], far outweighs the short term expediency of selling the asset. Telstra is currently returning in excess of 12% annually to Government. It does not require much intelligence to see the long-term cash flow from Telstra will massively exceed any short-term debt servicing benefit.

2: SALE REVENUE SHOULD BE USED TO RESTORE THE ENVIRONMENT. There is no doubt the Australian people are concerned about our deteriorating ecosystems and want Government action. The "Save the Murray" campaign is used as an issue that could be funded by Telstra sale revenue. The sum of $1.5 billion to be committed over 5 years has been set as the desired target by Federal and State Governments.

Government could dedicate part of its annual dividend stream to assist the environment. Say $500million for three years or $300 million over five years would achieve the current objective together with retention of the people's asset and the continuing cash flow into the future.

The dividend stream could be committed to solving our environmental issues…. It is obvious that some $1.7 billion is available ANNUALLY…. As compared with the proposal to commit $1.5 billion over 5 years from various Governments via taxation and "environmental levies". "Save the Murray" levy is a good example. Another is the soon to be introduced "Natural Resource Management Levy."

3: GOVERNMENT CLAIMS INFORMATION TECHNOLOGY SERVICE PROVISION HAS IMPROVED AS A RESULT OF PARTIAL PRIVATISATION OF TELSTRA.
This is a straight lie. The reason information technology service provision has improved is a result of technology: NOT PRIVATISATION. Cables and telephone poles are ancient history. The Broad Band Internet revolution and mobile phone technology are not a result of partially privatising Telstra.

4: GOVERNMENT SHOULD NOT BE INVOLVED WITHIN A PUBLIC COMPANY.
Both the Telstra Board and Government argue that each is constrained and unable to function efficiently due to the majority shareholding of the Federal Government. This smokescreen can be solved by Government selling off, say 2%, of its shareholding to retain just under 50% of the capital.

The combined value of the two revenue streams flowing to Government from Telstra is $3.4 billion and rising annually. Government receives dividends and taxation. Government's dividend stream, in particular, is rising rapidly due to two influences: Last year's $1 billion public share buyback increased the Government shareholding from 50.1% to 51%. Similarly, the current buy back will further increase Government ownership to approximately 51.8%. The Board of Telstra has a current, declared, policy of significantly increasing shareholder returns over the foreseeable future by further share buy backs and dividend increases.

The $1.7 Billion taxation stream flowing to Government is clearly government revenue in the same way that government receives taxation from us as individuals.

The fundamental purpose of an elected Government is to provide the necessary infrastructure for people to live happy, healthy and prosperous lives in a safe environment. Thus Governments have built roads, ports, schools, hospitals, bridges, rubbish dumps and, over the years, our postal and telecommunications infrastructure. Thus, the old Post Master General's Department, later Australia Post and Telecom. We, the people, need to remind our elected members of the fundamental responsibility of Government: TO DELIVER INFRASTRUCTURE FOR THE WHOLE NATION TO LIVE HAPPILY, HEALTHILY, PROSPEROUSLY AND SAFELY. The original 49.9% shareholding should never have been sold.

Telstra has openly stated that it will not build and operate infrastructure where it cannot generate satisfactory returns on its investment. Thus, small, outlying rural communities and isolated regions will never have telecommunication services the majority of Australians take for granted.

It is important to remember the colossal returns Telstra is generating from its urban investments.
Telstra's stated rate of return on capital is currently 26.8%. There are few public Companies and very few farmers who can match this rate of return on capital. To use current rates of return from Telstra's very profitable urban infrastructure as the yardstick for rural investment is to guarantee that rural infrastructure will never be built. It is commonsense. Thus, we see the difficulties of outback Queensland, or small communities living in electronic "dead spots" that require specific telecommunications equipment. Telstra has consistently stated it will not invest where there are lower, poor, investment returns on equity.

Government has stated it will not sell Telstra until all Australians have comparable service irrespective of location. If Government is genuine about comparable service, it is not difficult to give all Australia good telecommunication services.

An annual allocation from the Government DIVIDEND stream would achieve instant results. Let us allocate say, $50 million annually, to building towers or infrastructure. Let us accept that an average telecommunication tower costs $300,000. Some 100 towers would appear annually and the dividend stream would fall to $1.65 BILLION.

Or, alternatively, perhaps Telstra might consider investing $50 million annually in unprofitable regional infrastructure? When one considers the $billions that Telstra has recently invested in buying other businesses, paying down long term debt, buying back shares or in poor investments, $50 million annually is little more than beer money.

What has Telstra spent in the last couple of years? It has:
1: Committed $1.75 Billion to share buy backs.
2: Written off $950 Millions in its failed Asian "Reach" investment.
3: Paid back some $1.1 billion in long-term debt.
4: Paid out $980 millions to buy Trading Post magazine and Kaz I.T company.
Effectively, Telstra has generated internal revenues that paid for $5 Billion of investment in the last two years on top of the $10billions of tax and dividends!

Of this $10billion, the Commonwealth Government has received $6.6billion.

Yet Telstra maintains it is unable to invest in rural Australia and Government refuses to invest some of it's own colossal revenues to carry out its elected responsibilities.

Let us presume that Telstra does upgrade CURRENT poor services to outback Australia as required by the Federal Government and the sale of Telstra occurs.

How will Federal Government guarantee future rural information services when the next quantum leap in technology occurs as is predicted in Messrs McGauchie's and Switkowski's own annual report when the Board has consistently demonstrated and states it will not invest in poor investment returns?

It is obvious a fully privatised Telstra will deliver declining information technology services to rural Australia. The Board's own stated investment criteria guarantee declining levels of investment in unprofitable locations.

We should ask ourselves why has America required the full sale of Telstra as part of the soon to be signed Free Trade Agreement? The above financial statistics are the reasons. America desires the colossal cash flow. Even by American standards, Telstra is a magnificent investment, a huge cash cow. Telstra delivers returns comparable with the banking industry.

What will happen to Australian tax payers if Telsta is fully privatised? Clearly, Government will lose its current taxation and dividend streams. Some of those monies will go overseas, some will go into Superannuation plans and so on. A majority of the current $3.4 billions of annual taxes and dividends will not remain in Australian Government control. The inevitable result MUST be that Government will need to replace the lost $3.4 billions with increased taxation of our people.

The best summary of Telstra's attitude to meeting its core responsibilities can be gained from the two closing paragraphs of Telstra's own CONCISE ANNUAL REVIEW, 2004 report:

QUOTE: "We expect to grow revenues faster than expenses. This will require sharp improvements in productivity across the Company to permit investment in new capabilities and technologies. Telstra's capital expenditure levels will remain around $3 billions per annum over the medium term"

"What will these initiatives deliver to our shareholders? Three things - revenue growth, attractive margins and strong cash flows - which will combine to support an active capital management program and attractive returns to shareholders." END QUOTE.

What will these initiatives deliver rural Australians? The only possible outcome will be deteriorating services and inadequate infrastructure. We will never get the message any clearer than the above statement by the Chairman and C.E.O. of Telstra. Telstra is clearly stating it will never invest in service provision. It will invest to maximise profit only. We have been warned.

WE MUST PRESERVE TELSTRA. TELSTRA IS GOVERNMENT'S RESPONSIBILITY FOR INFORMATION SERVICE PROVISION TO ALL AUSTRALIANS.

THERE IS ONLY ONE WAY TO PREVENT THE TELSTRA SALE.

Under the Federal Constitution each of our States is represented by 12 Senators. The reason for this equality is so that each State Government can use its Senators to block legislation that they feel is not in the interests of their State population. Nowhere within our Constitution is there any mention of the Party political system now enforced on us, particularly in the Senate.

It is beyond dispute the overwhelming majority of Australian people want to keep Telstra as a Government asset.

The only way to ensure this objective is for our State Parliaments to require their elected Senators to vote against the Sale.

RECOMMENDATION: THAT THE PROVINCIAL CITIES ASSOCIATION SEEK THE SUPPORT OF THE AUSTRALIAN LOCAL GOVERNMENT ASSOCIATION TO APPROACH THE PREMIERS OF EACH STATE SEEKING THAT THEY REQUEST THEIR RESPECTIVE SENATORS OPPOSE ANY FURTHER SALE OF TELSTRA SHARES BELONGING TO THE COMMONWEALTH GOVERNMENT.

SUGGESTED ACTIONS:
1. The above information be conveyed to all S.A . Federal Politicians.
2. The media be given this information.
3. The State L.G.A. be asked to support the objective to retain Telstra for the people of Australia.

Peter Davis
MAYOR

Monday, 15 November 2004

"How to Kill a Country" by Linda Weiss, Elizabeth Thurbon & John Mathews. Australians have been sold out; the Australia-US Free Trade Agreement must surely be the last straw. This book by three Australian academics discloses the devastating trade deal our so-called political representatives and bureaucrats have made with the Americans - supposedly on our behalf. It is time to fight for a national strategy which take's pride in the achievements of the Australian people We must fight to secure the conditions necessary to safeguard what we have achieved, and to enhance its value in the future. How we deal with foreign powers flows from the way we see ourselves as a people. If we see ourselves as independent, self-reliant and industrious - let's act like it! Can we do anything about this Free Trade Agreement with the Americans or must it play out before our eyes like some Greek tragedy - as has happened in Canada? Read about the sell-out and what the authors suggest we do. Price: $29.95 posted.