Watchdog says Telstra claims unfounded

Claims by Telstra that the introduction of a new wholesale pricing scheme would cost the telco $800 million were unfounded, according to Australian Consumer and Competition Commission chairman Graeme Samuel.

He said the figure of between $600 and $800 million had simply been plucked out of the air.

Samuel told a Senate estimates committee earlier today that nothing Telstra did to protect itself from competition would surprise him.

It follows claims by Telstra that an ACCC planned four-band wholesale pricing scheme would damage not just the telco but country people by pushing up prices.

"The $800 million figure has never been explained to us or, we believe, to anyone else by Telstra," Samuel said.

"It's a figure that is plucked out of the air.

"I'd have to say to you ... that nothing surprises in terms of Telstra's public promotion of its case on the issue of being freed-up from regulatory processes."

Earlier this week, Telstra executives at a separate Senate committee hearing were unable to explain how Telstra came up with the $800 million figure. Asked by Nationals Senator Barnaby Joyce if he thought regulations governing Telstra needed to be tightened, Samuel said it was the telco which had been complaining about the rules imposed on it, not the ACCC.

He said the ACCC had not raised any major concerns about regulations since parliament passed legislation paving the way for Telstra's sale in September.

The legislation significantly tightened up regulations for Telstra, including tripling fines for breaching certain competition rules.

The telco will also be forced to carry out an operational separation, or split, of its retail and wholesale businesses to improve transparency of its operations.

Samuel also took issue with claims by McGauchie that the idea of operational separation within Telstra was a nonsense concept.

"With the greatest of respect to Don McGauchie, may I make the following comments: No corporation of any significance with multiple divisions can operate without separate financial accounts and inter-divisional dealings and transfer pricing based on clear, transparent and commercial arms length principles," he said adding that all major businesses need a system of operational separation.

"I know of very few major corporations throughout my history as an investment banker and as a lawyer who have been able to operate without having in place this essential financial management discipline," he said.