New Chief At Australia's Telstra Faces Market Scrutiny

SYDNEY -(Dow Jones)- Just over a year after his abrupt departure from France Telecom's mobiles unit Orange, incoming Telstra Corp. (TLS) Chief Executive Solomon Trujillo faces one of the biggest challenges of his 31-year telecoms career.

Trujillo will be the focus of local and overseas investors for the next 18 months or more as he leads Telstra through the Australian government's sale of its remaining 51.8% stake in the nation's biggest telephone group.

Analysts say the A$30 billion-plus (US$23 billion) share sale, which ranks as the world's biggest and is slated for late 2006, could be preceded by another bout of restructuring involving management changes, asset sales, and more layoffs.

With a first year pay packet of at least A$5.5 million, Telstra's new chief will also have to develop a harmonious relationship with chairman Don McGauchie, analyst say.

Regarded as a hand-on chairman who has Canberra's full support, McGauchie was instrumental in the Telstra board last December securing an agreement from Ziggy Switkowski that he would quit the company by midyear.

At first glance, Trujillo's background "seems appropriate", said Richard Wallace from Wallace Funds Management. "He's got pretty broad experience and seems like a good person to lead Telstra," Wallace noted.

Deutsche Bank analyst Richard Long said, however, that it will be some time before investors can make an accurate assessment of Trujillo and his plans for Telstra.

"He is not a known quantity at the moment," Long said, noting his very brief stay at Orange.

Some analysts said Trujillo, 53, built himself a solid reputation for cutting costs during his short stint at Orange and has a record of leading growing companies and driving brands. This track record was lauded by McGauchie at his Melbourne briefing Thursday.

Trujillo started his career in 1974 as a business forecaster for Mountain Bell, which later evolved into U.S. West. He rose through the ranks and was appointed President and Chief Executive of U.S. West in 1995, also taking on the chairman's role in 1999.

"It is his experience at U.S. West which is probably more appropriate for Telstra given its business is more similar," said one analyst, who asked not to be named.

Won't Be Calling the Shots By Himself

Trujillo retired from U.S. West in 2000 after its merger with Qwest Communications and moved to high-tech startup Gravitron Inc. as its chief executive. He joined the Orange board in 2001, and was appointed chief executive of the pan-European mobile phone company in March 2003.

He stepped down from his London-based position at Orange at the end of March 2004 after France Telecom secured full control of the group.

France Telecom praised Trujillo for his leadership, but his brief tenure was plagued by speculation of ego-clashes and that he was frustrated by controls put on his vision for the group.

While Trujillo has a reputation for setting ambitious targets and a penchant to spend, investors don't expect he will face the same issues at Telstra, at least in the short-term.

"The board has made a decision that they don't think there is anyone with appropriate experience here and it doesn't make sense to go and hire someone from overseas and then circumvent them," said Wallace from Wallace Funds.

"One of the main attractions is that Trujillo comes with great industry experience, and being an outsider and not an Australian, that would suggest he does not have to play politics as much as an internal candidate would," he said.

"He can bring his own ideas and agenda in to some extent."

Nonetheless, the new Telstra chief will have to work closely with McGauchie, with his contract stipulating he must have "a close and constructive relationship with the chairman of the board".

"McGauchie has described Trujillo as straight talking and direct, which could make for an interesting mix on the Telstra board, given McGauchie is also quite to the point," said Macquarie Bank telecoms analyst Tim Smart.

"It is also interesting to note that while at U.S. West, Trujillo was chairman and chief executive so he was calling the shots and didn't have to answer to anybody," Smart added.

"But at this point, we don't know too much about him. He is out here this weekend, so we'll get more of an idea about what he is about then," he said.

-By Lyndal McFarland, Dow Jones Newswires;
61-2-8235-2957; lyndal.mcfarland@dowjones.com
-Edited by Ian Pemberton

(END) Dow Jones Newswires"

Posted to the site on 9th June 2005