Optus calls for Telstra split by 2010

Outcomes for Telstra shareholders

Sheridan admitted he "can't speak with great authority on market variations", but believed that the regulatory reform Optus has suggested will be good for Telstra shareholders.

"In principle, this should not have a significant or material impact on share evaluations one way or another," he told iTnews.

"Analyst reports in fact say that the parts of Telstra might be worth greater than the whole due to the increased transparency of the business."

Regardless, he said, structural separation would surely produce better outcomes for Telstra shareholders than the agressive strategies of former CEO Sol Trujillo and former chairman Don McGauchie - Trujillo famously being quoted that should he ever submit Telstra to structural separation he "should be shot."

"The regulatory strategy of Telstra for the last 18 months has certainly not delivered great value for Telstra shareholders," Sheridan said. "Some $10 billion has been wiped off their share price.

"At the end of the day, the Government is looking into regulatory reform, with Telstra as its focus, and that will have to have an impact on the Telstra business. 

"In putting together our submission, our greatest concern wasn't for Telstra shareholders but for the broader base of consumers."

Sheridan said he is unsure of how the new management team at Telstra will deal with the need for regulation.

"They shouldn't take a glass of whiskey and a revolver and go into a closed room," he said. "They should recognise that an important line has been created with the Government's announcement. Clearly the writing on the wall is for structural separation."

Good for the gander?

Sheridan said Optus does not feel it should be governed by the same rules it has devised for controlling Telstra.

"I don't think the same issues apply to Optus," he said. "Optus is in a totally different circumstance. Optus is not a vertically-integrated incumbent, which 12 years after the introduction of competition still maintains 70 per cent of fixed line revenues with margins between 55 and 88 per cent. Our position in fixed line communications is a long, long way behind."

The same need for regulation doesn't apply in the mobile market, he said, where Telstra owns a 42 per cent share as opposed to 70 per cent in fixed line.

"Regulatory reform should be focused on those parties with significant market power," he said. "In the case of fixed line communications, it's Telstra."