Telstra reshuffle signals cultural change

Telstra is looking to a more positive relationship with the Federal Government after appointing a new chief executive and chairman to steer the telco giant through tough markets and threats to some of its revenue lines.

Telstra group managing director of enterprise and government David Thodey was today named Telstra's new boss, replacing Sol Trujillo when he returns to the US on June 30.

The company also announced the immediate resignation of chairman Donald McGauchie, who together with Mr Trujillo oversaw a deterioration Telstra's relations with the government.

Mr McGauchie has been replaced by non-executive director Catherine Livingstone, who has been with Telstra since 2000.

Analysts on Friday described 54-year-old Mr Thodey as a "safe appointment'', saying he would seek a more cooperative relationship with the government than by Mr Trujillo.

Telstra shares rose 4 cents on the news, but couldn't hang on to the gains and ended the day down 1 cent, or 0.3%, at $3.23.

"I am absolutely delighted to be the next CEO of Telstra, absolutely delighted,'' said Mr Thodey, a former chief executive of IBM Australia and New Zealand. "It is such a wonderful company. It really is a great Australian company.''

He is described as urbane and articulate and is thought to be popular with the Federal Government.

Mr Thodey was the right person to lead Telstra, Ms Livingstone said.

"David will bring a fresh approach and renewed energy to Telstra as we continue to transform our business,'' she said. "David is the right person to lead Telstra on the next phase of the company's growth.

"His grasp of the fundamentals of technology combined with a deep appreciation of customer needs give him a unique understanding of the opportunity and challenges facing Telstra.''

The terms of Mr Thodey's new contract, including pay, are still to be drawn up, a Telstra spokesman said.
 
Mr Trujillo, who is the last of a group of Americans parachuted into Telstra's management ranks four years ago to leave the group, is departing with at least $3 million in cash.

Mr Thodey and Ms Livingston both affirmed the company's commitment to to a five-year transformation program begun by Mr Trujillo after his appointment in 2005.

Fresh start

But Ms Livingstone stressed the company was looking at a fresh start.

"I think we're actually going into the next phase,'' Ms Livingstone said.

An important factor for Telstra in coming months will be its relationship with the government, which it negotiating the implementation of the $43 billion national broadband network.

Under Mr Trujillo and Mr McGauchie, the telco took a combative stance, culminating in its exclusion from the broadband tender process that has since been scrapped.

Last month, Telstra was on the receiving end of strong criticism from its biggest shareholder, the Future Fund, over the erosion of its multibillion-dollar stake in the telecommunications giant.

Future Fund chair David Murray said the value of its 16% holding had fallen by $2 billion because of speculation over the national broadband network, and which companies would build it.

At the time, Mr Murray would neither confirm nor deny that the fund would press for an extraordinary general meeting aimed at unseating Telstra's board.

The Future Fund is a government body established to oversee cash in public sector superannuation savins. At the end of March, there was almost $60 billion in the fund, about 10% of which was in Telstra stock.

Mr Thodey said the company had already held talks with communications minister Senator Stephen Conroy and that those negotiations would continue.

"I think its very important you have a strong relationship with government,'' he said. "We are an Australian company, we have the Telecommunications Act, so we need a very strong working relationship with the government.

"But I've got to stress we've got to do what's right for Telstra and Australia going forward.''

Positive for shares

Analysts predicted the change of management at Telstra would have positive impact on the company's share price in the long-term.

"It's a safe appointment,'' Fat Prophets senior analyst Greg Fraser said. ''(The market's reaction) should be positive and I think most investors are looking for an Australian executive.''

"He doesn't have as much telco experience but he fits the bill of a palatable chief in terms of its relationship with the government.''

Austock Securities senior client adviser and strategist Michael Heffernan said: "I think the new chief executive has a good reputation and will work with the government.''

Telstra also announced on Friday that board member Peter Willcox would also resign, as he was concerned a judgement against him relating to his time as a James Hardie director might cause embarrassment for the telco.

Mr Willcox was one of the former James Hardie board members found by the NSW Supreme Court to have breached their duties as directors.

He will remain in the position until the annual general meeting in November, but will not stand for re-election.

Telstra chief financial officer John Stanhope, who was in the running for the top job, has been promoted to become an executive director on the Telstra board.

AAP