The Association of U S West Retirees



Telstra on hold as the top amigo Sol Trujillo leaves

The Australian

Michael Sainsbury

February 27, 2009

SOL Trujillo, Telstra's original "amigo", will leave Australia at least $40 million richer when he flies back to his native US later this year.

But the legacy he leaves will last far longer than his four years in charge of the nation's biggest telco - a testy relationship with the federal Government, a broadband strategy in tatters, a share price near 10-year lows and a business only part-way through the five-year "transformation" he promised on arrival in mid-2005. Telstra shares - and its formidable core business - have held up relatively well in the financial storm, but yesterday's press conference announcing his departure came with a warning that profits would fall short of expectations in the coming year.

Mr Trujillo's exit comes just two months after billions of dollars were wiped off Telstra's market value when his antagonistic strategy ended with the company dumped from the Government's $15 billion national broadband tender.

His unprecendented battle with successive governments, which came with a $12 billion spending spree, has weakened his relationship with a board that once defended him without hesitation. "I and the board both thought it was the right time to make that decision," Mr Trujillo said yesterday.

The high-flying telecommunications executive, already wealthy thanks to a $US72 million payout from former employer US West in 2000, arrived in mid-2005 to replace Ziggy Switkowski, who had been fired by the board several months earlier.

He quickly put his stamp on the business, noticeably by hiring a string of former colleagues, dubbed the "amigos" by what Telstra dismissed as a xenophobic press. Together they set about rebuilding Telstra, and ensuring they were well rewarded.

Mr Trujillo was paid $13.4million last financial year, up from $11.8 million in 2006-07 and $8.7million in his first year. With his basic salary of $3 million likely to be topped up with bonuses this year, he will depart having earned more than $40 million for his time at Telstra, although the final figure will not be known until later this year. Mr Trujillo has also been strongly criticised for his relentless program of first-class travel and luxury accommodation tastes. Some of his hotel rooms cost thousands of dollars each night on the Telstra shareholder account.

When the amigos, including chief operating officer Greg Winn, began leaving last year, commentators began speculating that Mr Trujillo would follow them, despite being part-way through his five-year strategy.

He will leave the company on June 30 after exactly four years in charge.

"I have some personal considerations, in the sense that I spent a couple of years in Europe and then moved here and spent almost four years here at this stage," he said yesterday. "I have family, I have parents, elderly parents, I have children, I have all kinds of reconnecting to do, and to be quite frank, I've got to lose about eight kilos."

Mr Trujillo is understood to have been actively seeking a new chief executive role offshore for at least 12 months, but asked if he had a job to move straight into, he said: "At this stage, no."

A group of internal Telstra candidates, led by finance chief John Stanhope and consumer chief David Moffatt, will jostle with others found by international search firm Egon Zehnder to replace him.

Offshore candidates named on a possible long list include Hutchison UK's Australian chief Kevin Russell, BT retail chief Gavin Patterson and Cable & Wireless chief executive John Pluthero.

Mr Trujillo's resignation came as Telstra handed down a profit of $1.9 billion for the December half-year, down 1 per cent for the first drop for two years. Telstra shares dropped 9c to $3.68 yesterday - just above lows near $3.50 struck in the middle of 2006 - after the company's profit downgrade. "Everybody has hit the wall in this last period of time," " Mr Trujillo said.

Telstra shares have held up well in the past year, with the company considered a safe haven from the financial storm. Over Mr Trujillo's 3 1/2 years at the company, they have marginally outperformed the S&P/ASX200 index.

However, the share price is still 27 per cent below the level when he joined the company, and its stockmarket value has crashed $17.2 billion.

About 10 per cent has been wiped off the group value since Telstra was dumped from the broadband tender in November because of a piecemeal response by the company - an event Mr Trujillo admitted could cut $2billion from its revenues.

Only this week, Telstra began making more conciliatory noises towards the Government in relation to broadband.

Mr Trujillo's battle with the Government was put on hold long enough to undertake the third sale of Telstra shares to the public in 2006, raising $16billion and making the company fully private for the first time. Mr Trujillo's main achievement at Telstra has been the construction and marketing of the company's national third-generation mobile phone network, NextG. This has returned Telstra to a better position in the competitive $16 billion-a-year mobile phone sector.

"This company is very well positioned for the future," Telstra chairman Donald McGauchie said yesterday. "I say this very carefully - (we have) a very wide range of options in what we can do going forward."

Mr Trujillo has met targets for earnings, revenue and aggressive job cuts, with 10,000 Telstra workers laid off from the company on his watch. But his strategy remains incomplete.