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telstra writes off $1bn on asian disaster

  1. Telstra writes off $1bn on Asian disaster
    Feb 22
    Anne Hyland in Hong Kong with Jane Boyle and Martin Pretty

    Telstra's disastrous foray into Asia has cost another $1 billion after the group conceded on Friday that its Reach Asian cable joint venture was effectively worthless.

    Telstra chief executive Ziggy Switkowski admitted he was "embarrassed" by the $965 million write-down of Reach's value to zero as he announced a shake-up in the company's Asian management, including the resignation of Reach chief executive Alistair Grieve.

    The move sent Telstra shares plunging to a five-year low of $4.16, raising doubts about the status of the company as a safe haven for investors in a week in which the share prices of several major blue-chip stocks suffered.

    The write-down also reignited speculation about the tenure of Dr Switkowski, who presided over Telstra's Asian expansion in 2001.

    "The senior management team and board of Telstra have to take responsibility for the extremely poor decisions," said Perpetual Investment's head of Australian equities, John Sevior. "A lot of shareholders have worn a lot of pain. Whether it means senior management changes or board changes, something's got to give."

    The slide in Telstra's shares will make it harder for the federal government to revive plans to sell a third tranche of the company in the short term, especially as the losses are mounting for those investors who bought into T2 at $7.20.

    Federal Communications Minister Richard Alston said the write-down was a decision for Telstra.

    "Decisions about commercial investments should not be made by politicians on the basis of their current political agendas," he said.

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    However, the federal opposition's Telecommunications spokesman, Lindsay Tanner, said the losses were more evidence the company should not be fully privatised.

    "It's time John Howard stopped allowing Telstra to behave like a private company and forced it to focus on its primary responsibility, delivering high-quality telecommunications services for all Australians," Mr Tanner said.

    Telstra will report its half-yearly results on Thursday, when some shareholders believe the board could unveil an increase in the interim dividend.

    Telecommunication companies globally are under pressure to return cash to shareholders now that the dot com era and its blue-sky promises have passed.

    But with an expected dividend yield of about 5.5 per cent for the 2003 financial year, some analysts suggest Telstra has been oversold.

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