Telstra chairman Donald McGauchie has some interesting challenges in the months ahead, but the easy one is hiring a new chief executive officer. There is a wealth of candidates –internal and external, local and foreign – to fill the shoes of the departing Sol Trujillo.

The more difficult transition will be managing the expectations and continuity of senior management, of which at least half a dozen could reasonably expect to be considered as CEO material at Telstra. Only one can succeed, which ensures disappointment for those who miss out.

Some will inevitably look elsewhere for the next stage of their careers, and that, to my mind, represents a much greater potential disruption to the Great Telstra Transformation than the departure of Trujillo.

Indeed, it’s a testament to boards and CEOs, past and current, that Telstra has such an embarrassment of riches in selecting an internal candidate. David Moffatt, David Thodey, Deena Schiff, Kate McKenzie, John Stanhope and Bruce Ackhurst all have their merits, as do perhaps less obvious candidates such as Tarek Robbiati (head of Telstra’s HK CSL mobile unit) and Geoff Booth (head of CountryWide).

Having eight internal candidates of such a high calibre is truly impressive.

Strategic continuity will be a key to McGauchie’s thinking – he won’t be looking for a Sol clone or heir, but he will want someone who can maintain an ongoing state of internal revolution and Telstra’s improving international standing. Both impulses will be important to ensuring Telstra can capitalise on the recovery of the share market, when it comes.

NEGATIVE: No doubt there will be negative media noise regarding Trujillo’s legacy today – focusing on such nasties as his tax aversions, golden parachute and apparent disregard for democratic will. Indeed, the mass media and the parliamentary press release boxes will be uncharacteristically ascetic today! For me, its been a great source of amusement for nearly four years to witness the apoplexy Trujillo generates in otherwise mature, sober adults with his competitors and in the media, especially over at Rupert’s joint. It will be a hard act to follow!

But Trujillo’s strongest achievements were a) collectively owned by teams and b) internal. As such, they don’t get raps from the commentariat.

To my mind, probably the most important advance at Telstra under Trujillo was the development of its highly-focused customer research database. Telstra simply has considerably greater visibility of end-user wants and desires than its competitors, and a greater ability to customise and optimise offers. Anecdotal and reported evidence from the market place suggests these efforts are having real cut-through in customer up-sell and win-back. With the possible exception of Optus and 3, evidence-based marketing isn’t a strong suit of CxOs in Australian telcos, and this development has taken many of them unawares.

Also significant was the newfound attitude that an incumbent could go on the front foot in the market, in contrast to the reactive deference displayed by most. This has resulted in achievements such as the 21Mbps-cum-42Mbps national HSPA network and the lower-profile 30Mbps upgrade to HFC networks in Sydney and Melbourne.

This was straight out of the US West DNA handbook – where Sol and the team earned their stripes. Indeed, US West was historically first to market in the United States, and possibly the world, with innovations such as DSL, caller ID and ISDN. I must admit that CommsDay was wrong about Next G – I originally editorialised that it would put Telstra at a disadvantage on handset form factors and functionalities against its competitors– but the network now stands as an internationally-respected success.

All this helped Trujillo position Telstra as a telco to watch in global terms, which will flow into foreign investor interest once share markets begin their inevitable recovery.

Of course, Trujillo will admit there were some things that could have been handled better. The company’s IT transformation has proved a mixed bag, although it could be argued the only way to ever get any progress in IT departments is to set unrealistic goals! Likewise, Trujillo and his policy team will probably regret that they didn’t get more cut-through with their regulatory campaigns, particularly given that their original FTTN idea has been co-opted by government into a weapon to inflict “market reform”.

But Trujillo leaves Telstra with more focus, purpose and direction than he found it, drifting and doing little more than managing inevitable decline. His successor has been left an easier task, given that in a few years both the economy and share market will be on the up. Trujillo excelled everywhere but on share value, and given the state of the world stock market, he can hardly take too much blame for that.

SPECULATION: Now one can’t columnise on the departure of Sol without indulging in what is going to be a fun sport over the next couple of months – speculating on his replacement.

Of the internal candidates, David Moffatt probably ticks the most boxes, although all the major candidates have their merits. But given it seems every ambitious EVP of an English-speaking telco in the world has been suggested as a candidate, let me name one who hasn’t been mentioned in dispatches: Alex Arena.

Arena is an expatriate Australian MBA engineer-come-regulator with a highly unusual career trajectory. He was a board member at Austel (the ACMA forerunner) in the 90s before moving over to Hong Kong to oversee that market’s turn-of-century liberalisation – arguably the most successful telecom competition reform on Earth given the multi-network investments and end-user sophistication in evidence there.

After a suitable juncture, he then defected to the “dark side” and joined the incumbent he once regulated – PCCW – as its 2IC, helping oversee its transformation from a highly-complacent monopoly to an aggressive competitor. His titular superiors over that period were more patrons than operatives, so it’s fair to ascribe much of what happened to Arena and other senior execs such as Paul Berriman.

Now, Arena’s the boss, and like Telstra with NextG, PCCW has forged an earned reputation as the leading IPTV telco in the world. In fact, it is the only telco in the world to take on an established cable TV network and actually beat it in the market place on share. Indeed, with its “quadplay” strategy, PCCW probably ‘gets’ the convergence thing more than any other telco in the world.

Admittedly, there is a constant swirl of controversy and incredulity that surrounds the actions of PCCW’s leading shareholder and chairman, Richard Li, which has resulted in a well-deserved boycott of its stock by serious investors – but that is no fault of Arena’s. Indeed, I suspect that Arena is probably bored with the shenanigans over there and wants to run a grown-up telco. And he ticks three boxes few others can: international experience, knowledge of how regulators think and Australian nationality.

As I say, nothing more than mischievous speculation and my two cents worth. 

by Grahame Lynch