Telstra shares had their biggest fall since they were listed yesterday after the Telco was excluded from the national broadband tender process.
The shares fell 48 cents, or 11.6% to $3.65, a level only visited two years ago.
The drop wiped a huge $6 billion from Telstra’s market value, a loss the board and senior management seemed oblivious to yesterday.
Investors had taken the view that Telstra was the best placed Telco to build a network reaching 98% of the population.
The slump has removed the strong impression that Telstra has been relatively recession-proof in the current share market slump.
The surprise departure leaves just three consortia – including Optus – with plans to build a national network at the negotiating table.
Two other bids are state- and territory-based proposals.
The network roll-out was one of Labor’s key promises at the November 24 election in 2007.
After the dumping became known, Telstra accused the Government of excluding its 13-page proposal for the "trivial reason” of not including a plan to involve small businesses.
Telstra chairman Donald McGauchie said: "The decision to exclude us from the [tender] is the Commonwealth’s decision to make. But Telstra is the only company to have submitted a proposal with a real financial commitment of $5 billion.”
Late last month Telstra increased the brinkmanship with the Government by lobbing in a proposal that failed to meet some tender guidelines.
Telstra has been at loggerheads with the Government for months because it wanted a guarantee that a new network would not split its business.
Mr McGauchie said in the statement to the ASX revealing the exclusion:
"Telstra is the only company with the existing network, technical know-how, world-leading vendor, skilled workforce, established wholesale systems and proven track record of building world-class networks.
"The reasoning given by the Commonwealth for the exclusion is that Telstra did not include a plan for how to involve small and medium enterprises (SMEs) in the building of the NBN when Telstra lodged its NBN proposal on 26 November.
"Telstra considers it has fully complied with the RFP requirements (which did not require a SME Plan to be lodged as part of the RFP Proposal itself) and that the Commonwealth has used a peripheral issue to exclude Telstra.
"Telstra provided its SME Plan to the Government in early December and, in Telstra’s view, in accordance with the RFP," Mr McGauchie said.
"The Commonwealth could hardly have dreamed up a more trivial reason to exclude Telstra from the NBN.
"This is a process that seemingly excludes bidders on such trivial and legally questionable technicalities but doesn’t take any action on material issues such as financing and having the technical capability to build the network.
"What is even stranger is that the Minister has ample powers to accept Telstra’s SME Plan under the RFP and have his Expert Panel get on with a process that includes Telstra.
"Telstra has sought to build a world-class NBN since mid-2005 and we have seen a range of government processes come and go, none of which have resulted in any decision to build.
"Throughout this time, Telstra has successfully pursued its business strategy and has not allowed itself to be distracted."
In stockmarket briefing CEO Sol Trujillo repeated this line.
He told analysts:
"The Government in our opinion has done so on the basis of a triviality that we did not include a small medium enterprise or SME participation plan as part of our proposal on 26 November.
"We did submit a SME plan in early December based on the way they drafted the RFP, and we think that they’re wrong in the way that they’ve reached their conclusion.
"In any event, had the minister wanted us to be included he had ample ability under the RFP to have us there.
"The important point at this stage, I think, for everybody to understand is that our proposal is still the only one that is funded, is the only one that has true technical capability and workforce and trucks and all the things that many of you have heard us talk about, to actually deliver and to actually be able to integrate into our existing network.
"So the punch line here for us is that it appears as though there’s an exclusion here on a technicality, the only material filing has been from Telstra so it is an interesting situation."
He made it clear Telstra would be ploughing ahead with its own plans:
"We will continue to focus on providing services to our customers, including our high speed wireless broadband, our fixed broadband via ADSL or HFC cable networks.
"We do have lots of options for future high speed broadband delivery….clearly we have the wireless platforms and fixed platforms.
"Again, whether it be on a Telco fixed platform or an HFC platform for further services development, as well as expansion," Mr Trujillo told market analysts.
"Even after decisions in legislation there’s a lot of time left to run before anyone else starts building, in which any real impact on Telstra, even assuming we don’t respond, and of course we will respond competitively, is years away.
"We reserve our rights regarding future action. It is too early to rule anything in or out."
But Mr Trujillo and the Telstra chairman, Don McGauchie didn’t explain why Telstra didn’t conform to the tender requirements.
There’s a smell of Telstra’s traditional arrogance here and n
