Trench warfare between the government and Telstra has sunk to a new low, with Telstra chief Sol Trujillo told to watch his mouth and the behaviour of his mates by the Prime Minister who has blasted the telco's actions as "disgraceful".
The Prime Minister's rebuke to Telstra's top brass was made in front of a joint party room meeting between the National and Liberal parties this morning and comes less than 24 hours after Trujillo drastically recalibrated market expectations of the carrier's future performance at a market briefing, sending the telco's share price south by more than 5 percent in less than 24 hours.
At the market briefing, Trujillo identified Australia's regulatory environment as the main impediment to Telstra maintaining growth and profitability as the government seeks to divest its remaining 51.8 percent of the telco.
Asked whether Trujillo's position as CEO remains tenable, a spokesperson for Communications Minister Senator Helen Coonan would only say that Trujillo's employment is a "matter for the board of Telstra".
In the meantime, the Prime Minister has told Telstra's chairman, Donald McGauchie that outspoken Telstra executives must stop talking down the company's share price, saying it is the obligation of senior executives to talk up the company's interests, not dampen them down.
The government is incensed about an on-the-record dinner Dr Phil Burgess, Telstra's group managing director for regulatory, public policy, and corporate and media relations, held for Canberra press gallery journalists last Wednesday where he openly said he would not recommend Telstra shares to his mother in the current environment.
One known source of particular irritation for the government is that Burgess' dinner effectively eclipsed what was intended to be a red-letter day for Senator Coonan's relaunch of the media cross-ownership debate through a speech at the National Press Club in Canberra last Wednesday.
Burgess was present during the speech and sat at the same table as Senator Coonan during lunch at the event.
According to one government source, soon after details of the dinner found their way to the government, "the Burgess fine dining experience was henceforth renamed the last supper".
However, Telstra is not backing down from its position, nor Dr Burgess' tactics. A statement from the carrier in reference to the Prime Minister's criticism said Telstra was merely "encouraging debate on some key issues that we believe are important to our millions of customers, shareholders and staff".
"Telstra does not want the focus of this public discussion to be on personalities but on policy. We haven't resorted to insults or name calling, and we'll stay focused on trying to change policies that stop Telstra competing with our foreign rivals like SingTel Optus," the statement said.
Some are seeking to hose down the war of words over Telstra, not least the office of Finance Minister Senator Nick Minchin, which will spend the proceeds of any Telstra sale. A spokesman for Senator Minchin sought to diffuse speculation the government is ready to remove both Trujillo and Burgess, saying the Prime Minister's "disgraceful" comments were directed at Burgess' actions -and not a direct questioning of Trujillo's future.
Asked whether the government still retained confidence in Trujillo's position as head of Telstra, Minchin's spokesman said it did, but cautioned that the telco needed to learn to accept the Australian regulatory environment.