Telecom: The insider's story

Climbing to the top of the corporate ladder was worth the personal cost, says Theresa Gattung. Photo / Greg Bowker

When she sat down last year to write a memoir of her career, Theresa Gattung couldn't have foreseen that her timing would prove so fortuitous for her publisher. The book was originally scheduled to hit stores next month, but because she got the job done slightly sooner than Random House was expecting, the release date was brought forward to March.

The result, Bird on a Wire, goes on sale next week, billed as "the inside story from a straight-talking CEO".

While there is undoubtedly a significant audience who will lap up her version of her time heading what was once New Zealand's biggest public company, that version is definitely more poignant in light of the XT disaster that has again thrust Telecom into the media spotlight for all the wrong reasons.

Although she only signed off the proofs a few weeks ago, Gattung's only observation about her successor, Paul Reynolds - that so far he seems to have escaped the public opprobrium she had to face just months into the job - is already dated.

But many of her other comments, such as her insistence there was always more to the Telecom story than greedy shareholders versus venal politicians, are even more interesting given the XT fiasco. While she is keen to avoid being seen as bitter or ungracious, she is clearly grateful for the opportunity to point out that she warned nearly three years ago that the Labour Government's determination to unleash its full regulatory arsenal on the company would almost certainly have unintended consequences.

She insisted then, and continues to insist, Telecom at that point had accepted the need for significant regulatory reform, but genuinely believed the better option was for it to split into two separate companies, rather than a single company with three separate divisions (retail, wholesale and network services).

In May 2007 she told an analysts meeting in Sydney that if the Government stuck to the latter option, the result would be a "train wreck".

While it would be going too far to draw a direct link with the XT network's specific problems, she now agrees, with her trademark guffaw, that had she still been writing she might have been tempted to add another chapter, presumably headed: "I told you so."

Gattung herself is on the new network, so she has experienced first-hand the same frustrations as other XT customers. That's karma, some might say - and she admits in the book that one thing she would do differently would be to make Telecom executives pay for their own services.

But she continues to insist that the political bombshell dropped on Telecom in 2006 was a form of "collective madness" that is at least partly to blame for the situation the company now faces. At the time, she acknowledges, the decision to force it to open its exchanges to its competitors (known as unbundling the local loop) was popular, and supported by both National and Labour. But it was obvious, she maintains, the company would struggle to cope with the massive change required, involving hundreds of deadlines, milestones and commitments, all on tight timeframes and all subject to penalties if they weren't met.

It didn't help that it was still dealing with a previous round of regulation, and was also being pressured to figure out how it might deliver new services such as significantly faster broadband to areas that were extremely expensive to reach.

"There were some commentators who were saying this will be good for the industry and good for Telecom. Well, it's debatable whether it was good for the industry, but it's ridiculous to suggest it's been good for Telecom. It was never going to be good for Telecom and it hasn't been.

"Two years later, there has been a 24 per cent drop in profits and multi-day outages. I think the train wreck is showing up."

While it would appear that no one yet knows the exact cause of the XT outages, Alcatel-Lucent seems to be accepting at least some of the blame.

Commentators have also hinted at possible underinvestment, and noted Alcatel-Lucent's inexperience with building networks of this specific type. But Gattung's comments are interesting, as you would assume she still has good sources.

In fact, since she left Telecom 2 years ago, around three-quarters of her top 100 staff have also left. Many of their replacements have inevitably been hired from overseas.

While she refuses to say so herself, the inference is clear: many of the people running Telecom these days are from other countries and have limited experience building its previous networks.

Ironically, some are also being paid a lot more than they were when Gattung was much criticised as New Zealand's highest-paid executive.

The issue of ever-escalating corporate salaries has become an even bigger b te noire for the public in the wake of the global financial crisis. But Gattung agrees it is strange shareholders have allowed it to happen in a company such as Telecom, which is clearly shrinking, not growing.

While some will see it as sour grapes, she has a point: "Now that I'm long gone I, along with the rest of the country, wonder about the propriety of a company making half the annual profits it did a few years ago but paying its executives considerably higher salaries," she writes.

The XT fiasco has also revived the debate over whether Telecom has a knack for backing the wrong horse in the race for technological supremacy. Its former chief executive and chairman, Roderick Deane, has admitted it made the wrong call when it decided to give up its GSM spectrum in favour of CDMA in the early 90s.

But Deane and Gattung have both pointed out that government officials were also to blame; the bureaucrats made it clear they would prefer Telecom and its main mobile competitor to be using different types of networks, presumably to give customers more choice. Vodafone, or BellSouth as it was then, decided to go with GSM, so that forced Telecom to stick with CDMA.

Its bigger mistake, however, appears to have been misreading the political mood - or rather, if you believe Deane and Gattung, making the mistake of taking the last Labour Government at its word that it would not force Telecom to unbundle its network.

Gattung also acknowledges the company was blindsided by Telstra's decision in 2005 to scrap its own relatively new CDMA network. The move signalled the end of Telecom customers being able to use their own mobiles in Australia.

Telstra, under Sol Trujillo, opted for a new type of technology known as W-850, which straddles both CDMA and GSM. But Gattung and her senior team were concerned the jury was still out on W-850 and opted for more traditional technology.

Reynolds later overturned that decision, and the XT network now uses the same technology as Telstra. Could that be another strand to its problems?

"I'm not making a judgment about that call," she says. "I wasn't there, and I don't know what data they had on it. And Telstra rolled out W-850 and it looked like that network was fine."

As Gattung acknowledges, Deane quit Telecom in a huff over the unbundling decision. And for a while, his replacement, Wayne Boyd, continued making similarly aggressive noises, particularly when it was suggested Telecom should split into three divisions.

"We're quite staunch about this - their proposal won't work," Boyd said at the same quarterly results briefing where Gattung made her "train wreck" comments.

At the time Boyd insisted the company would not invest in a next generation network. He also refused to rule out breaking up and selling off the company, should regulation not go its way.

But they proved to be empty threats.

In her book Gattung refers to the "complete capitulation" of the board to the Government's wishes - sparked, she believes, by the fact that it had begun interviewing people for her job, "who'd probably done nothing more than have a quick glance at the last Telecom annual report and look at a few newspaper headlines".

She believes her potential replacements told the board what it wanted to hear: that operational separation was manageable "and there was no need to do something as drastic as structural separation".

This sudden change of heart by the board led to the departure of the two executives seen as her most likely successors, Simon Moutter (now chief executive of Auckland Airport) and Marko Bogoievski (now Infratil chief executive).

While her "happy gene" appears to have persuaded her to pull some punches - former rival Annette Presley doesn't even get a mention - Gattung attempts to put some myths to rest. She insists, for example, that she was never as close to Helen Clark as some suggested, and therefore their eventual falling out was not as momentous as some believed.

But she does reveal that Labour Party president Mike Williams did once approach her about becoming a candidate. Needless to say, she was "flabbergasted".

She admits she still struggles with the fact that right-wing parties seem much less devoted to feminist causes than left-wing ones. But she has always been ambivalent about ideology, and discloses she had a much more complex relationship with Rod Deane than was probably apparent. In fact, she admits, there were "times of real tension" between them, especially towards the end of her tenure.

You can certainly imagine Deane choking on his cornflakes while reading the later chapters of her book, when Gattung muses about the nature of capitalism and whether the global financial crisis might indeed push the world towards a "new business paradigm".

While she is absolutely unapologetic about doing her best to wring the maximum possible profit out of Telecom, she also suggests that perhaps the rise of Asia will rub off on the rest of us and convince us that American-style greed is not so good after all. It does sound rather like something that Saatchi & Saatchi boss Kevin Roberts might say, and she acknowledges this view could be nothing more than a post-recession fad that will fade as soon as the good times begin rolling again. But she also confirms that Roberts, whose sister was head of human resources at Telecom during Gattung's reign, and who is now on Telecom's board himself, has been her real mentor for some time now.

The other main point of the book, of course, is to give the all-too-rare woman's perspective on what it's really like to climb to the very top of the corporate ladder, where the rungs are still overwhelmingly occupied by men.

For many men, it will only confirm their suspicions that boys and girls do indeed come from different planets - and the sooner women recognise it is they who are the aliens, the better.

After flirting with the idea of moving to Paris or California, Gattung decided a while ago that Wellington on a good day was impossible to beat.

She reveals that last year she was approached for another chief executive's role, for a "very large" organisation in New Zealand in the banking and telecommunications field. She was keen.

It won't be hard for many people to figure out who the chairman was who decided, however, that he wouldn't even interview her, because regardless of her substance, he didn't like her style.

She's over it now, but admits it felt pretty sexist at the time.

Interestingly, in answer to the question of whether it has all been worth it, given the huge personal price she has paid - including the decision to forgo children, the health issues she suffered, and the miserable end of her relationship with her long-term partner - the answer seems to be "yes". With one proviso: "I wish I'd known at 25 that life is a really long time and you don't need to be in such a hurry."

Regrets? A few, including some things she agrees Telecom could have done better, and some things she should have done herself.

Yet Gattung, who is still only 48, is clearly thoroughly enjoying her new part-time job as chair of an organisation trying to revive New Zealand's moribund strong wool industry. She is convinced it is making headway with its new Laneve brand, particularly in the United States, and that turning sheep into carpets will eventually become fashionable again.

Six months ago, she was discussing her future with her former partner, photographer John Savage, who remains a good friend. He suggested that after 30 years of approaching life as if she were driving a Mack truck, she might actually enjoy a few years zooming around on a Vespa.

"And I thought that was a great analogy. Because it's not as if I'm sedentary. It's not as if I'm rooted to one place. On any given day I could be in any given place in the world, or in New Zealand, for sure. But it is more like zipping around and being more fluid, with less stress and less pressure."

The salary she received during her time at Telecom has, of course, enabled her to buy herself some time.

But the best part of her new life, she insists, is that "nobody owns me, nobody owns my soul, and I'll say what I think". So there.

Gattung on ...

Government regulation: "There has been a 24 per cent drop in profits and multi-day outages. I think the train wreck is showing up."

Telecom salaries: "I ... wonder about the propriety of a company making half the annual profits it did a few years ago but paying its executives considerably higher salaries."

Ambition: "I wish I'd known at 25 that life is a really long time and you don't need to be in such a hurry."