Telstra AGM: more of the same

Angry Telstra shareholders were not placated by the chairman's call to 'accept reality' of the share prices, at a lengthy and aggressive annual general meeting in Sydney last week.

In a long-winded AGM, which stretched beyond five hours, shareholders were told to expect no immediate change in the telecommunication giant's flat outlook for the current financial year.

Despite signs of growth returning to the telecommunications industry, Telstra shares were currently pining below $5, finishing at $4.82 on Friday, far below the $7.40 paid by many shareholders as part of T2. "After four months trading in the 2003/04 year, there is no change to our previous comments, reiterated at the recent Q1 results announcement, as to our outlook," Telstra chief Dr Ziggy Switkowski told shareholders.

"Our revenue growth remains less than industry growth at present," Switkowski said. "But we are confident in our strong cash flows. And our costs will track lower to ensure improved margins, and that we are building shareholder value."

"Our goal is to return Telstra to annual profitable revenue growth approaching 4 percent over the next two to three years," he added.

Chairman Bob Mansfield said: “The board acutely recognises that the share price position today is marginally improved from what it was 12 months ago".

Mansfield said a "growth element" was needed to propel the stagnant share price and “to prevent simply being eaten away by Regulatory and Competitive realities in the marketplace”. Telstra was working on a number of initiatives to combat this, including expanding its broadband and wireless offerings and better exploiting Telstra's intellectual property born out its Research Laboratories, he said.

“Looking to the future, it's simply not good enough to sit still and presume we will stay as successful as we are. To sit still, in the medium and long term, is to risk going backwards.”

On the sale of the remaining Commonwealth shareholding, Mansfield said: “We look forward to a day when Telstra can be a 'normal' company, free of the political commentary and associated microscopic media attention that it is currently subjected to -- unlike any other company in the country.” Meanwhile disgruntled shareholders aired gripes ranging from Telstra's beleaguered Asian investments, a proposed increase in directors' remuneration package and a lack of ADSL connections in the inner city.

Amongst the many grievances expressed by the shareholders was the board's planned amendment to allow the maximum aggregate remuneration of non-executive directors to increase by $170,000 to a combined $1.3 million per annum. And investor after investor took the floor to call for the resignation of both Mansfield and Switkowski.

Mansfield's suggestion unhappy shareholders could sell their stock and move on stirred up more criticism.

"There's no compulsion on you to own shares if you choose not to do so," Mansfield said.

At this suggestion one shareholder applauded Telstra director, Sam Chisholm, as the wisest director on the board. “Do you know why? Because he doesn't have any Telstra stock,” he said.

On Telstra's investment debacles, this shareholder accused Mansfield and Switkowski as having the investment smarts of schoolboys. Nine months ago Telstra wrote off its $965 million investment in pan-Asia Internet infrastructure company Reach, an equal joint venture with Hong Kong's PCCW. Mansfield later retracted his remark, saying: “That's the last thing I'd suggest people do… The point I'm making is that there is no quick fix."

"The share price is well below where we would like," he said.

Despite dissension in the ranks, all of the amendments were eventually passed, returning non-executive directors John Fletcher, Donald McGauchie, John Ralph and John Stocker for another three-year term on the board. Mansfield said there would not be a pay increase for board members in the current financial year.