Telstra Split Inevitable

News out of Senator Stephen Conroy's office confirms what we all know was coming sooner or later, and that is the Federal Government is hell-bent on splitting up the communications leviathan.

In one form or another Telstra has been the major player in Australia's telecommunications industry from day one. Sure, there has been competition for both landlines and mobile/broadband, but everybody knows that it has always had a commercial advantage due to its large infrastructure that was already in place when 33 percent of the company was privatised in 1997. With the government ownership now down to 17 percent, it has decided that it's time to put the company on an even more even keel.

Of course Telstra will not be happy about this split up, and you think the likes of Optus and Vodafone will be more than happy with the current state of play. And why wouldn't the latter be particularly happy after playing on an uneven field for so long.

Splitting the business into both retail and wholesale businesses, in theory, should be better for the consumer. Suddenly the "buying" power, or features of Telstra, have shrunk. Sure, they'll still have most 3G coverage for your mobile, but further on down the track when it comes to reinvesting in infrastructure, there won't be so much money in the kitty. And this is where it should even out to a level playing field. It will take some time before the infrastructure will need replacing, but when it does, maybe it just won't be Telstra that will be able to say they have "more coverage" than any other carrier.

As a word of note, I remember a good 10 years ago or more New Zealand privatised their power companies, with the then National (read: Liberal) government saying it would lead to more competitive pricing. It didn't. It ended up like the petrol bowser prices – one would put their prices up, then the other would "match" it. Same thing could happen with the Telcos, but only time will give us the answer.