You’ve undoubtedly heard of the revolt by Telstra shareholders against the government’s structural separation plans, especially if you read the AFR .
Perhaps you imagined that the said shareholders were mums and dads of Howardian fable, ordinary Australian voters whose simple but touching faith in the conservative dream of a shareholder democracy has been betrayed by the Rudd government’s socialist impulses. Or something.
A closer examination of the “revolt” shows mums and dads have nothing to do with it. The criticism of Stephen Conroy’s demand that Telstra separate its infrastructure and retail operations comes from a clique of some of Australia’s wealthiest men and, inevitably, the big banks.
These are the outfits that are most commonly mentioned as forming the core of the “shareholder revolt”.
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- Investors Mutual. Fronted by respected funds manager and serial BRW rich lister Anton Tagliaferro, Investors Mutual has taken the lead in the “campaign” against the changes.
- Australian Foundation Investment Company — huge Melbourne establishment investment company fronted by blueblood Bruce Teele and a board featuring Don Argus and John Paterson.
- 452 Capital. Headed by another rich lister, Peter Morgan — although Morgan has been ill in recent months. 452 Capital is part-owned by the Commonwealth Bank via Colonial Mutual. 452 Capital has also been vocal about the government’s proposals. A 452 manager is quoted in the AFR today saying she wanted to tell Steve Fielding that the government’s approach could “have damaging implications for millions of families”.
- BT Financial — wholly owned by Westpac.
- Lazard — until 2007 it was local independent Carnegie, Wylie, until the US transnational Lazard bought it.
- Maple Brown Abbott — headed by rich lister and funds management legend Robert Maple-Brown.
- Tyndall Investments — a subsidiary of Suncorp-Metway Bank
- Orion — a fund manager 42% owned by the Treasury Group.
- Cannae — another manager in the Treasury Group.
The Treasury Group’s role in the revolt is interesting because it also owns a huge chunk of Investors Mutual, making it a key player in the campaign. If AFIC’s Bruce Teele is an establishment pillar, Treasury Group’s chairman and part-owner (and sometime vintner) Mike Fitzpatrick is the new Victorian establishment — AFL chairman, ALP-connected, on so many boards he has been accused of conflicts of interest.
These are all fund managers. They make money managing money, and they are all very good at it, which is why so many of them have fortunes in the hundreds of millions. Several of them are notable for their conservative investment strategies, involving taking and holding blue-chip stocks like the major banks — who own or part-own several of them — and giant companies such as Telstra.
They are only interested in maximising the profits of the companies in which they invest. They have no interest in the wider economic impacts of corporate behaviour, and have a direct incentive to oppose competition — something about which the cartel that is the Australian banking sector knows quite a bit.
Their lack of interest in wider economic issues was shown when Tagliaferro and AFIC’s Ross Barker fronted the Senate Communications Committee’s hearings on the Telstra Bill three weeks ago to attack the government’s approach. Both were asked by Labor’s Kate Lundy — herself well-versed in telco issues — whether they had made submissions to the government’s previous consultation processes and discussion papers on telco reform. Neither had. “That’s a very good question,” Barker told Lundy. “We missed the opportunity.”
Tagliaferro also has plenty of history on Telstra. In Tagliaferro’s view, Telstra’s board and management have had less to do with the company’s dire stockmarket performance in recent years than governments. It was, therefore, not the havoc wreaked by Sol Trujillo, of whom Tagliaferro was a strong supporter, that caused Telstra share price to collapse but the Howard government. At the Senate hearing Tagliaferro repeated this view, saying “over the last few years Telstra’s share price has been hampered and hurt by several regulatory changes”.
It’s probably fair to say that Tagliaferro is in a minority — possibly of one — in thinking it was John Howard who caused the 30% slump in the Telstra share price during Trujillo’s tenure. Any views of Tagliaferro on telco regulation should therefore be put through a reality filter first. His personal submission to the Senate inquiry borders on the hysterical, calling the government’s legislation “immoral”, “an absolute disgrace” and “ridiculous in the extreme”.
What’s just as intriguing is that this shouldn’t be a case of private interests versus the public interest. Deutsche Bank and Goldman Sachs JBWere issued analyses last week maintaining their Buy recommendations for Telstra despite of Conroy’s proposed approach. Deutsche’s 12-month share price target was $3.70; GSJBW’s was $4.40. “Telstra remains our #1 pick in the telecoms sector,” the latter concluded. Evidence that the government’s proposed approach is the “draconian” assault on shareholder value looks thin indeed.
Whatever the Telstra “shareholder revolt” may be, it shouldn’t be confused with a legitimate contribution to the debate over telco policy. These are some of Australia’s richest people, backed by our cartel-like banking sector, pushing their own interests, even when the evidence is that structural separation might indeed be, if not the “win-win” Stephen Conroy insists that it can be, then hardly damaging to the “#1 pick in the telecoms sector”.