Australia could do real damage to its telecommunications future if it forces Telstra to undergo operational separation.
Although other countries have experienced success in separating their incumbent telcos, Australia has some fundamental differences that could make separation of Telstra a disaster, according to analyst firm Ovum.
“Naive approaches to the issue of Telstra separation could do serious damage to the Australian telecommunications industry,” said David Kennedy, research director at Ovum.
The separation of British Telecom access network and wholesale operation in 2005 is widely considered a separation success story. New Zealand recently followed suit, separating Telecom NZ into network access, wholesale and retail business units.
But Ovum believes that these success stories cannot be replicated in Australia without significant forethought.
Furthermore, an operational separation of Telstra could have the roll-on effect of retarding Australia’s broadband future.
“Operational separation also has costs,” Kennedy said, pointing to the immediate 30% drop in Telecom NZ’s share price when the separation was first announced.
According to Ovum, if Telstra’s value dropped in the same way it would not be able to invest in new networks and technologies, delaying rollout of advanced broadband.
“Operational separation might be implemented in Australia, but before that could happen a lot a hard work would need to be done to identify the right approach,” Kennedy said.
“The reality is that we haven’t even begun to do this work,” he said. “At the very least, it is going to take years.”
