Richard Inder: Boyd will need the strength of Hercules to lift Telecom up

Wayne Boyd's first outing this week as the new face of Telecom should ease concerns over the future of New Zealand's largest-listed company.

The chairman-designate, who takes the reins at the start of next month, was not explicit about his plans, but that was expected. A change agent will never say a lot, as public pronouncements can only limit flexibility further down the track.

What is surprising - and gratifying - is that he said more than is customary in such circumstances.

A degree of tea-leaf reading is necessary but Boyd, in his interview with the Business Herald, tipped his hat to the problems facing Telecom and hinted at the errors and his strategy to resolve them.

He faces a Herculean task.

Telecom, under outgoing chairman Roderick Deane and his protege, chief executive Theresa Gattung, underestimated the Government's desire to boost the uptake of cheap high-speed internet and its willingness to force the issue.

As a result, Telecom has been forced to open its network to rivals; it faces enforced separation of the retail and network businesses; it has lost more than $2 billion from its market value and its relationship with politicians - who have enormous power to destroy shareholder wealth - is in tatters.

Meanwhile, AAPT, the Australian company it acquired in 1999 for A$2.3 billion but this year wrote down to A$628 million, hangs like an albatross around its neck. It wants to sell but has found no takers.

Telecom is almost universally reviled, partly because New Zealanders like to strike down tall poppies, and because the company has been so heavy-handed and arrogant with its customers.

And finally, Deane's resignation, just after the Government's disclosure of its plans, and the interregnum between his announcement and Boyd's appointment left Telecom rudderless at a time when investors were in need of clarity.

Investors should expect:

Greater focus on customers

The chairman-designate's views on the Telecom board, which he may expand, were the most revealing.

"We will be looking for people in the technology sector, and people with clear strategic and operational experience.

"The board is also searching for someone in the fast-moving consumer goods and the banking area ... the brand consumer interface."

Deane has long been criticised for stacking the board with lawyers, who accounted for half the sitting directors before the shake-up.

Boyd said directors should be judged by their qualifications as well as their experience. But, by highlighting the branding and marketing deficit, he is indicating Telecom has not engaged with customers and the electorate as well as it should have.

The same interpretation must be applied to his view that the board lacks technology experience. Even before the Government disclosed its plans, Telecom should have been expert in branding and technological innovation.

His remarks must also be read as a slight on Gattung, Telecom's marketing guru before she was elevated to chief executive. (More on that shortly).

Strategic and operational experience are the standard qualifications of any professional director and, therefore, the comments are plain vanilla.

Relationship with Government

Boyd described it as "one of the key situations" the company needed to deal with, and he highlighted his roles as chairman of Meridian and Auckland International Airport as one of the key assets he brought to the table. Both companies operate in highly regulated environments.

He also said Telecom must foster a relationship with the Government characterised by: "No surprises, open discussion, credibility and listening." These are qualities, at least in the first case, clearly lacking in the present relationship.

He also makes it clear he knows what is at stake: "I do stress we are going to ensure there is a level playing field for wholesale and retail customers."

A review of Gattung's role

Asked whether Gattung was the right person to lead the executive team, he replied: "I have said in a number of interviews that we have a very able management team."

Was this an endorsement of Gattung? "We have a very able management team and that includes all the team."

At the very least, he will review her position. But here is a prediction - the plunge in Telecom's share price and the extent of investor and public discontent nearly requires a head to roll, if Boyd is to be taken at his word. Gattung, the public face of Telecom for the past seven years, is the logical sacrifice.

A review of assets

A review of AAPT's future and other assets, such as its Yellow Pages directory business, is on the agenda. Voluntary separation of the business into a wholesale and resale arm remains on the cards.

"It's a new era for Telecom," he said. "We have to move the company forward and, clearly, in a transformation project we must embrace all our assets."

Investors will treat those comments with a degree of scepticism, especially since Boyd has been a Telecom director for the past two years and, therefore, was part of the board that led the company into its present predicament.

But, he has put forward arguments sufficient to differentiate himself from the previous regime. Moreover, the scope of his comments should begin to dispel fears that the ship is stationary without a capable captain.

Moreover, Boyd has another asset up his sleeve - he is an affable chap.

Recounting how his daughter, a doctoral student in Australia, congratulated him on his appointment with a text message, his attitude was a stark contrast to Deane's imperious demeanour.

"She had been on the Herald web page and said, 'Dad I see you have taken something else on', which was rather nice."

This will do Telecom no end of good in such combative times.