TelstraClear sale: Vodafone CEO expects job losses

Telstra agrees to non-competition clause; reaction in Australia to sale

Vodafone CEO Russell Stanners told a media conference today that he expects job losses in overlapping back office roles following the acquisition of TelstraClear, but he would not comment further on numbers or from which areas of the business.

Telstra announced it will sell its New Zealand subsidiary TelstraClear for $840 million to Vodafone this morning, although the sale is subject to approval by three government agencies.

Market rumours that Telstra will use the proceeds of the sale to buy Telecom appear to be just speculation.

TelstraClear chairman Gordon Ballantyne says there is a non-competition clause in the contracts but the terms and dates of that clause are confidential. This makes it likely that Telstra can't come back in another form in New Zealand and compete against Vodafone.

Stanners says TelstraClear's fixed line network will allow Vodafone to further pursue the highly lucrative enterprise market. Further investments in creating hosted solutions will be made, and Stanners names Datacom specifically to likely be one of Vodafone's new competitors.

The consolidation of the two companies would give Vodafone a 26 percent share in the fixed line business, according to Vodafone.

Stanners says as a part of this deal, Vodafone will receive spectrum that is currently allocated to TelstraClear. Telstra in Australia will retain two 5 MhZ blocks of 2100MhZ spectrum and two 15MhZ blocks of 1800MhZ spectrum.

At the conference TelstraClear CEO Allen Freeth thanked Telstra and his team at TelstraClear for the work they’ve done over the last eight years in New Zealand.

Freeth's future

A spokesperson for TelstraClear says "that until the sale is confirmed, there is no change and TelstraClear and Vodafone remain competitors, with Allan Freeth running TelstraClear. "

At the media conference it was stated that “if and when regulatory approvals are granted Russell Stanners will be the CEO of the combined business”.

Reaction across the ditch

In Australia the Sydney Morning Herald is reporting that the sale makes the end of Telstra’s “overseas misadventure” and there was little point in Telstra holding onto a business “whose contribution to the group's profit was barely discernible”.

Ovum analyst David Kennedy, who is based in Melbourne, says Telstra’s withdrawal from the New Zealand market shows that scale and integration are needed to justify foreign network investments.

“For Vodafone, its acquisition of TelstraClear is part of its ongoing global strategy to use fixed assets to support an integrated operation, especially in the enterprise segment,” writes Kennedy.

“The market will become more rational following the sale of TelstraClear, with two large integrated and scaled operators, alongside smaller value-seeking players to keep competition alive and well.”

See also: TelstraClear sale: Has Vodafone paid too much?
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