Low Earth orbit satellites open the door to Telstra’s mobile rivals in the bush

Communications Minister Michelle Rowland. Illustration: Sturt Krygsman

Communications Minister ­Michelle Rowland is effectively mandating the end of one of Telstra’s key marketing advantages – its claimed ubiquitous regional strength.

The telco, while neglecting to mention its subsidised regional support, has long boasted about its superior national coverage, even now when rivals have virtually identical percentages of the ­national population.

Telstra covers 30 per cent more of the land mass than its rivals, but even then it only covers 27 per cent of mainland Australia.

Rowland this week proposed mandating a Universal Outdoor Mobile Obligation (UOMO), which means each mobile operator must ensure its mobile network provides emergency cov­erage in the bush.

She is able to make the call because with new technology under low earth orbit (LEO) satellites, existing handsets can make contact by beaming a signal from one phone to a satellite 600km above the earth down to another phone.

LEO satellites are 60 times closer to the earth than traditional satellites, which means they circle the earth faster, giving them extra capabilities.

Telstra, Optus and TPG are all at different stages in negotiating deals with LEO providers, with the market presently dominated by US President Donald Trump’s offsider, Elon Musk, but the field is opening up fast, with Amazon, Lynk and AST among the other operators.

LEO satellites are just starting but were proven to work for text messages during the recent LA bushfires.

Telstra’s regional marketing claim is really aimed at city consumers worried that when they go on a trip they will lose coverage, and there are more of them than people in the bush.

A mobile phone tower costs about $1.25m and $100,000 a year to maintain, while a LEO service costs $20m-plus a year.

Little wonder Telstra is saying it’s “just in case connectivity”.

Why pay $20m a year when we haven’t had a bushfire in this town for decades?

In the mix is also coming wireless spectrum auctions, and TPG’s Inaki Berroeta argues spectrum should be part of the bargain with limited auctions and longer ­licence periods as part of the service obligation payback.

Through government and industry subsidies, Telstra built its regional strength via the fixed-line universal service obligation, but now technology has levelled the playing field and, worse, Rowland is planning to mandate the use of LEO.

Telstra is publicly supporting the concept but raises some objections to show what it really thinks and, having used regulatory subsidies to entrench its market strength, the last thing it wants is regulation that puts everyone in the same ballpark.

To be fair, it also rightly asks why regulate when we are all already working towards the same objective? The answer is that history shows that companies sometimes need a push to actually deliver.

Its early days on the road to UOMO, and Telstra is committed to “engage constructively as part of the process” – or put another way, play the game until the rug is pulled from its market power.

The election campaign, of course, adds a question mark to all promised government policy.

Telco outperforms

Better than expected results have helped drive Telstra to a 9 per cent market outperformance this month and 2.9 per cent this year, having just matched the average over the past five years.

Shareholder John Wylie’s campaign to get the company ­focused on improved returns via its taxpayer-backed NBN handout was backed by Morgan Stanley’s Andrew McLeod this week.

Over the past 14 years under the terms of the NBN agreement, Telstra has collected $1bn fully indexed a year for lending the government fixed-line operator equipment such as its copper wire ducts and access to homes.

These payments compare to its net profit last year of $1.8bn and over the past five years represent 56 per cent of company profits.

How many chief executives would knock back waking each year to find another $1bn land in the company accounts? The government-guaranteed cash will keep flowing until 2048.

Wylie et al want to know why Telstra isn’t making better use of the money generated by former CFO John Stanhope’s brilliant ­negotiations in 2011, when NBN started.

One problem is that Telstra needs NBN approval to play games with the proceeds and, last time the company asked, in 2017, then Telstra boss Andy Penn was told by NBN chief Bill Morrow to forget it, “no chance”. The reason then was that NBN was planning a big debt raising and if Telstra’s marketed a vehicle securitising its NBN handouts, it would be read as quasi NBN funds and may crowd out the market.

New NBN chair Kevin Russell and chief Ellie Sweeney may yet take a different view if asked, but they would certainly want something in return.

This is where the bargain starts.

NBN isn’t due to really stand on its own two feet until 2030, so just maybe Telstra could fathom a deal that helped deliver alternate funding for the government-backed monopoly.

There are thousands of investment bankers out there who could surely see their way to a solution to help boost Telstra’s value and save the taxpayer a few dollars.

Eyes on supermarkets

On Friday the ACCC report on the big supermarkets was handed to Jim Chalmers, who will use its contents as political fodder in the election campaign.

If by chance the Treasurer doesn’t get around to releasing the report, the ACCC by law must do so in four weeks unless directed otherwise, even if we are in the middle of an election campaign.

Coles this week reported a net profit margin of 2.5 per cent, compared with 2.61 per cent in 2020, and margins peaked in 2022 at 2.66 per cent, which makes it hard to mount a claim of price gouging.

But the regulator will want to show it has some bite, and perishable fresh foods is the most likely target, along with better signage to show price per portion.

Separately, Chris Leptos is due shortly to hand down his last report as the independent reviewer for the Food and Grocery code of conduct, with the ACCC to take control from April 1.

This is in accordance with the recommendations of Craig Emerson’s report on the code last year that included fines and mandatory membership.

The body was aimed at overseeing the handling of disputes between the big supermarkets and small suppliers and producing practical outcomes quickly.

Now small suppliers need to join the queue looking for ACCC help, which inevitably will take longer to settle disputes.

Emerson’s report effectively ended the oversight role and now the ACCC, having won more power, gets to show how it handles the deluge of complaints.

Medibank on the mend

Medibank’s David Koczkar is continuing to restore Medibank’s performance in the wake of the cyber theft two years ago, with the $360m profit reported for the last six months helped by investment income that accounted for a third of the profit.

Koczkar is also continuing to compete with private hospitals, opening a new clinic in Melbourne’s Kew recently in partnership with 50 doctors serving short-stay hospital visits, adding to the four existing centres in Sydney, Melbourne and Adelaide.

The Kew centre offers no-gap service to help members. Koczkar also has 105 GP clinics, is moving ahead with virtual consultations, and with Aurora ­offers full service integrated mental health centres.

Judo Bank founder Joseph Healy will move into the game in May under the banner Malu Health.

The government has yet to bite the bullet on reform such as abolishing price lists for prosthetics to let hospitals do their own negotiations, among other issues.