Maiden, Telstra’s General Manager for News Services, makes some valid points in
his defence (Crikey,
24/05) of Telstra’s decision to award a lucrative $3.4 billion contract to
Alcatel despite Telstra encountering a “decade of systemic problems” with the
supplier. Maiden noted that “Telstra is
getting its act together so the process starts working for our shareholders, not
for vendors. This company is engaged in probably the most dramatic
transformation of any incumbent telecommunications company worldwide.” In this
respect, credit must be given to Telstra’s new management team. Insiders
regularly criticise Telstra for still being run like a government body and being
riddled with inefficiencies. As Maiden correctly implies, streamlining processes
is essential in improving returns to shareholders.

Maiden’s comments did not distinguish between improving processes (good) and the
dubious practice of hastily awarding huge contracts to companies associated with
the CEO (bad). Maiden failed to address the key issue raised by the AFR, which
was that Telstra awarded a very major contract to a company which had allegedly
performed poorly in the past (including “overcharging Telstra at every
opportunity”) and was closely associated with its CEO. Maiden’s only defence to
the links between Trujillo and
Alcatel was that Trujillo’s association was akin to the CEO
of an airline’s relationship with Boeing or Airbus. This seemed to be a pretty
strange argument –
neither Geoff Dixon, Rod Eddington nor Brett Godfrey has ever served on an advisory
board to the CEO of Boeing or Airbus.

Telstra’s attempts to improve efficiency in its purchasing
is noble, lack of accountability and the appearance of favouritism are
not the hallmarks of a great company. The deal in question isn’t a contract to
buy a packet of biscuits for the tea room. Rather, it
is a $3.4 billion supply agreement – that is almost how much profit Telstra
makes in a year. If Telstra is going to award massive contracts to the CEO’s
mate, shareholders deserve a better explanation than that proffered by