New bloke takes fight to big boys

By PETER GRIFFIN telecoms writer

Telecom's Australian operation AAPT is officially in attack mode again with new chief executive Jonathon Stretch emitting the same kind of fighting talk the third-ranked telco was famous for a couple of years ago.

Headhunted from a high-level job at AT&T in Europe to head AAPT, the Australia-born Stretch has been in the top job only a couple of months but gives the impression he has been battling rivals Telstra and Optus for years.

"Telstra and Optus have thrived on complicating things, confusing customers and shafting the little guy," he told the Herald last week, on the day he turned 40.

AAPT, on the other hand, believed in "simplicity and agility", said Stretch, who wants greater transparency in the wholesaling transactions that go on between the two main telcos and their customers.

It is typical challenger talk that has not been delivered so firmly since the departure of AAPT's flamboyant American chief, Larry Williams, a couple of years ago.

Stretch told the Australian Financial Review a couple of months ago that he was out to "kick heads". Now observers are keen to see if the rhetoric equates to earnings growth.

So far, Stretch's reign has been characterised by a management overhaul, increased advertising spending and restructuring that has brought AAPT and its internet business, Connect, closer together.

"Profitable growth" is the target for AAPT, which is cashflow-positive after lengthy restructuring, an $850 million writedown in book value and the shedding of unprofitable customers.

AAPT generated revenue of more than $1.4 billion and earnings of $17 million in the year to June.

Stretch said a high-profile advertising campaign focused on the consumer market was bringing on board high-value customers but growing earnings was more important than boosting customer numbers.

"We shouldn't get over the moon about how quickly we turn that around," he warned.

One of Stretch's biggest frustrations with the business he has inherited is dealing with wholesale partners - competing telcos which AAPT spends around A$800 million ($921 million) with each year, spending that is inevitable given its limited network reach.

Stretch said AAPT paid rivals A$150 million a year in fixed-line-to-mobile termination charges alone.

"What bothers us about Telstra is the lack of transparency in the wholesale regime. In New Zealand there are 90 products that must be wholesaled in a regulated way. In Australia, Telstra and Optus get in, sign these deals, slow-roll the ACCC [Australian Competition and Consumer Commission] and have non-disclosure agreements."

The bottom line, said Stretch, was that where AAPT had its own lines in the ground and supporting equipment, "we've got better prices".

"Telstra and Optus are appropriating the value of the marketplace. It's very frustrating for me that we innovate and they steal the profits."

Taking the AAPT job meant a change of lifestyle for Stretch, who spent the previous eight years in Asia and Europe and traded Paris for Sydney. Settling into the new job has been juggled with buying a new house, new cars and finding new schools for his two children.

A former vice-president of AT&T Business in Europe, Stretch saw out the rise then fall of the global Concert partnership between AT&T and British Telecom, winning praise for the progress he made in Asia.

Stretch is well acquainted with his counterpart at Telstra, having served as a director in the past alongside Ziggy Switkowski at Advantra, a joint venture between Telstra and IBM. He also has respect for Chris Anderson, the head of Optus.

"The best competitors are the ones you respect, the ones you can learn from and the ones you enjoy inflicting pain on," he said.

"If I'm passionate about anything it's not about beating those two blokes but beating those two companies. I think they've let Australia down in the way that telecoms isn't as competitive as it should be."