news article

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    Good article should help small companies like newtel.Its
    about time the government did something to stop telstra's dominance in the telco market.

    Telstra slumps as the carve-up draws nearer

    TELSTRA shares crashed heavily yesterday on news the Howard Government plans to dramatically curb the company's dominance in the Australian telecommunications market.

    Executives at smaller telco carriers were ecstatic at the news while Telstra executives were shellshocked at the extent of the reforms unveiled by Communications Minister Richard Alston.

    More than $1.6 billion was wiped off the value of Telstra's shares, which fell 13c to $5.08. Analysts and fund managers agree it will hit Telstra's bottom line.

    Senator Alston's launch of the new policy came on a day when Telstra chief executive Ziggy Switkowski and chairman Bob Mansfield were in New Zealand and Singapore respectively and Telstra was silent on the Government's decision other than saying it was waiting for more detail.

    Senator Alston spoke yesterday at a private conference hosted by investment bank ABN Amro to launch a policy that turns four years of telecommunications deregulation on its head.

    "Telstra still has a huge market dominance overall to the point where you really have to have a special regime to deal with those circumstances," Senator Alston said.

    He was at pains to reaffirm that the Government would not pursue a structural separation of Telstra's wholesale and retail divisions -- those areas that sell services to other telco companies versus the phone services sold to everyday consumers -- saying that was "a fundamentally flawed approach and it doesn't make any sense at all".

    Instead, the Government was pursuing an "accounting separation" where Telstra could be forced to disclose separate wholesale profit and loss accounts.

    However, industry observers and Telstra insiders were critical of that lack of detail and questioned whether accounting separation could still mean a structural overhaul for Telstra in order to comply with the standards the Government might set.

    But Senator Alston added: "Discussions will be undertaken with Telstra and the wider industry about the precise nature and extent of accounting separation to be pursued."

    Telstra is already obliged to submit separate accounts to the Australian Competition and Consumer Commission but the ACCC has argued they don't go far enough.

    The push for separation is to give Telstra's competitors and the ACCC a better understanding of Telstra's cost structures for the use of its network.

    The Australian

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