Telstra slammed for taking sides

Last week, Telstra (ASX: TLS) CEO David Thodey took a rare step into the political forum to hedge his beats on future growth – but he may have stuck his neck too far.

Telstra is best placed to benefit from the NBNCo’s huge fibre optic network that was initiated under the Labor government. However, with September’s election almost certainly a Coalition victory, Mr Thodey gave investors and politicians no reason to worry.

He said that the company‘s existing 100-year-old copper network will “still keep going for another 100 years”. Communications Minister Stephen Conroy has accused Telstra of getting ready for a Coalition government and its proposed copper broadband network. “He’s [Thodey] doing what every CEO does, which is maximise the value of their shares”.

Under the Coalition’s plan, the network will not provide downloads as fast as Labor’s fibre optic design, but will cut costs by using Telstra’s existing copper network. Something it believes will be free, but Thodey’s recent comments suggest otherwise.

Regardless of who gets into power and whether or not a new plan is implemented, Telstra’s $11 billion contract with the NBNCo will be hard to renegotiate. However, Mr Thodey has proven that his company is willing to accept any piece of any pie, not just Labor’s.

Telstra has already proven unsuccessful in setting up a policy under the contract, which would see it control more of the network in an unfair way. The ACCC said it breached measures with a policy that would allow it to have an advantage over internet service providers like iiNet (ASX: IIN), TPG Telecom (ASX: TPM) and Optus, owned by Singapore Telecommunications (ASX: SGT).

Foolish takeaway

No matter which way the election heads, there is no guarantee the Coalition would completely scrap the rollout of the NBNCo’s fibre optic network. However, Telstra wants to make sure it can provide a solid growth opportunity for shareholders whilst any network is rolled out. With a 28c fully franked dividend, the safety of a huge corporation and a solid growth play, Telstra’s shares are almost perfect.

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Motley Fool contributor Owen Raszkiewicz does not own shares in any of the companies mentioned in this article.

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