Telstra gets a tougher competitor
Tuesday 27 March 2001
The acquisition of Australia's second-biggest telecommunications company, Cable Wireless Optus, by a Singapore Government-controlled company, SingTel, will inevitably invite comparisons with last week's announcement of a merger between BHP and the London-based, Johannesburg-born mining company, Billiton. Many Australians felt unease at BHP's readiness to discard the strong local identity that has defined it for most of its history in order to become one of the borderless giants of global trade, and they may now also wonder whether the arrival of SingTel on the Australian scene points to a future in which the country's telecommunications industry, whose products and services are essential to all other industries, is dominated by global players. If Telstra is eventually fully privatised, as The Age believes it should be, such a prospect may indeed be realised. But foreign-owned companies cannot be excluded from Australian markets, including the crucial telecommunications market, without also denying local companies the competition that is ultimately the best measure of their worth, and that provides the strongest incentive to increase that worth. Asking whether SingTel's purchase of Optus will be good or bad for Australia amounts to asking whether it will make Australia's telecommunications market more or less competitive.
By that test, there is little to fear in this deal. Optus is already controlled by a foreign company, Cable Wireless UK, whose 52.5 per cent stake in Optus SingTel will now buy. The new owner will retain the Optus brand name, and proposes to continue offering under that brand the variety of services that Optus now provides to its customers: mobile telephony, standard telephony, and multimedia and cable television. The rival bidder for Optus, Vodafone, was interested only in mobile telephony, with the result that the company would have been split between several buyers. Vodafone has withdrawn its bid, which faced a substantial regulatory hurdle in that it would have meant the No.3 player in the mobile-phone market swallowing the No.2, with an associated lessening of competition. The chief consequence of SingTel's purchase of Optus will be that it replaces a controlling shareholder that had wanted to dispose of its holding with one that is keen to build on Optus' existing base. So Telstra, which dominates the market, will now have a competitor intent on challenging its dominance, an outcome that can only be good for the customers of both companies.
Maintaining a competitive telecommunications market is also the key to overcoming the chief political obstacle to the full sale of Telstra, the fear that it will result in a loss of service to remote communities. A Telstra with a strong competitor will not be able to afford to shrug off customers.
This story was found at: theage.com.au |
