Sam's The Man As Telstra Resumes Search For Growth
Sydney Morning Herald
Thursday February 19, 2004
Telstra is faced with a new search for assets to grow its mature business following the scuttling of a plan to buy newspaper publisher John Fairfax.
One likely candidate could be Kerry Packer's Nine Network.
Telstra, four years ago, was involved in negotiations to buy Mr Packer's Publishing & Broadcasting Ltd but negotiations are thought to have broken down over the price of $10 billion.
Telstra director Sam Chisholm, the man at the centre of the furore over the rejected Fairfax proposal, is a former head of Nine and a long-term associate of Mr Packer.
Mr Chisholm did not return phone calls yesterday.
He is well known in media circles as a deal maker. He has worked for Rupert Murdoch at News Corp's BSkyB UK pay TV outfit; he is now chairman of Australia's only significant pay TV company, Foxtel (owned jointly by Telstra, Mr Packer's PBL and News) and he was instrumental in a now collapsed deal to partially merge Sydney's two rival talk-back radio stations on behalf of John Singleton.
Telstra's share price is expected to come under further pressure because of the boardroom split, following its disappointing interim profit results in which underlying revenues fell.
Some analysts have said Telstra would need to look at an acquisition if it were to meet its stated target of returning to industry growth levels about 4 per cent a year by 2006.
The division among its directors could make it difficult for Telstra to settle on an acquisition.
When it announced its profit last week, Telstra gave its clearest signal yet that its struggling joint venture with Pacific Century CyberWorks, Reach, may need another handout.
The telecom said plans at Reach were ``under review".
Broker ABN Amro said at the time this suggested ``a renegotiation with PCCW and the banking syndicate in the next two to three months".
It said this could trigger another capital injection of up to $US300 million ($380 million) into the Hong Kong undersea cable venture, whose network service prices have plummeted.
More importantly for Telstra's chief executive, Ziggy Switkowski, it comes nine months after he promised that the venture would be self-funding after a bruising renegotiation of Reach's debt.
That promise is now looking shaky after Reach plunged to a $113 million loss for the six months to December 31.
Sources at Reach have told the Herald that more than 100 people lost their jobs in November and December last year, out of a workforce of 700. This follows 250 redundancies last May as part of the restructure after the renegotiation of its $US1.5 billion debt.
Telstra's profit nearly doubled to $2.3 billion for the six months to December 31, compared with $1.2 billion last year which included the $1 billion write-down of Reach.
Telstra shares closed down 1c yesterday at $4.62 while Fairfax rose 2c to $3.66. PBL was up 8c at $12.48.
© 2004 Sydney Morning Herald