As Team Trujillo fronts today’s AGM to sell itself, its generous remuneration and a bit of T3 on the side, lurking behind the whole pitch is the reality of shrinking telco margins and what might or might not be done about them. The answer probably is “not much”.

With a view to getting an insight into how Telstra is travelling, I interviewed Optus CEO Paul O’Sullivan yesterday for Eureka Report, asking if Telstra had become a tougher competitor under its new management. The key part of his answer was:

The whole industry is showing declines in profitability and you see that in the EBIDTA margin reductions of everybody from the largest player, who’s down to mid-40s to about 38% at their last set of results, and smaller players — Vodafone went from about 25% to about 18% in the last set of results. We’ve actually managed to contain our reductions. We’ve gone from about 28.5% last year in margin to 26% this year. Very importantly for us, we’ve stabilised our margin quarter on quarter at 26% and reaffirmed our guidance for staying around that range or above it for the full year. So I think in a market that’s showing a lot of decline and downdraft we’re outperforming many of our peers.

And that’s the harsh reality Telstra investors are facing. With the old copper wire phones declining, there’s enough competition in the mobile business to eat away margins while the race is on to make the most of broadband. Telstra has the incumbent’s advantage, plus a renewed spend on technology, but the challengers aren’t going away.

O’Sullivan says a fibre-to-the-node broadband network will still happen one way or another, denying that Telstra called the bluff of Optus’s G-9 would-be consortium.

“We’ve said quite clearly that with the right investment environment, with the right regulatory protection, Optus has a strong appetite for funding and investing in a high-speed broadband network,” he said. “We’re consistent in that statement and remain committed and we will actually be working with the G9 to put forward a framework that will allow that to happen.”