Government mandates Telstra must break into two units

It looks like Telstra will now have to divide up the company into a separate wholesale and retail unit as the government looks to reform the country's telecom regulatory structure. This development comes after Australia's communications minister Stephen Conroy expressed concerns over the telco's dominance in the Australian telecom market. Citing the successful restructuring of the U.K. and New Zealand telecom markets, Conroy, who is leading Australia's ambitious National Broadband Network plan, thinks that Australia needs to follow suit.

Industry insiders argued that Telstra should have been divided up when the telco was privatized 10 years ago. If this latest plan goes into effect, the Australian government could potentially oversee one of the two units, while owning a 15 percent stake in the other unit. Telstra has long argued that splitting the service provider into two units would not only be very expensive, but decrease shareholder value. Despite Telstra's protests, the call to split the company up from the government, the competition regulator and even Telstra's main rival Optus has gotten louder and louder.

And while Telstra's CEO David Thodey said that while it is not happy about the proposal, the service provider wants to work with the government. "It is Telstra's view that many aspects of this package are unnecessary and need never be implemented if a mutually acceptable outcome can be reached on the National Broadband Network. We are willing to discuss options around separation."

If Telstra refuses to voluntarily separate, the Australian government could not only impose not only a series of fines, but laws that would force the incumbent carrier to split.

"It is the government's clear desire for Telstra to structurally separate, on a voluntary and co-operative basis," said Conroy in a statement. If it fails, the government would impose "functional separation", of the telco.

For more:
- Financial Times has this article [1]