Friday October 5, 07:43 AM
Australian government says it won't force Telstra break up
SYDNEY (AFP) - The Australian government said Friday it would not break-up telecoms giant Telstra (Munich: 909947 - news) in retribution for what it has termed an unprecedented political campaign ahead of a national election.
Communications Minister Helen Coonan this week said Australia's largest telecoms firm could be "punished" for its actions, raising the prospect the government may force Telstra to split its retail and infrastructure divisions.
But Coonan backed down Friday and said Canberra's policy towards Telstra, in which the government owns a minority stake, had not changed.
"There will not be unilateral structural separation of Telstra," Coonan told reporters Friday. "There is no change in government policy."
The relationship between the government and Telstra has soured after the administration backed a regional broadband network by a rival consortium and said it would open up bidding for a national network.
It deteriorated further when Telstra last week sent letters to its 1.6 million shareholders criticising the government ahead of an election expected to be held late November.
Coonan has labelled Telstra management "reprehensible" and "pig-headed" since the letter was sent, accusing it of "engaging in King Kong antics" with a political campaign unprecedented in Australian corporate history.
She said Telstra was acting as a "proxy" for the opposition Labor Party, which leads her conservative government in opinion polls.
Telstra welcomed the fact she had appeared to back down on the possibility of splitting the company.
"It is something that should never have been raised in the first place," it said in a statement.
"The minister has taken one step backwards from the precipice and Telstra shareholders will welcome it."
Some analysts believe splitting Telstra would help speed up the introduction of high-speed broadband in Australia by preventing the company using its dominant position in the market to stifle competition.
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