DJ Australian Govt Reviews Telstra Contract With Alcatel

CANBERRA (Dow Jones)--Australian Communications Minister Helen Coonan is reviewing Telstra Corp.'s (TLS) decision to award a A$3.4 billion contract to French equipment supplier Alcatel S.A. (13000.FR), her office confirmed Tuesday.

The contract, awarded soon after U.S. telecoms veteran Sol Trujillo started as Telstra's chief executive last July, was scrutinized by a parliamentary committee Monday.

Telstra executives were asked why Alcatel won the deal when a secret Telstra memo, tabled to the committee by opposition communications spokesman Stephen Conroy, detailed a series of problems Telstra had experienced with Alcatel projects over a 10 year period.

Coonan and Finance Minister Nick Minchin wrote to Telstra requesting more information about the Alcatel contract, Coonan's spokeswoman said.

"She's received a response only recently," the spokeswoman said. "She's considering that response."

The government is preparing to sell its 51.8% stake in Telstra, Australia's biggest telecommunications company, in about October or November this year. At current prices, Canberra will raise about A$25 billion (US$18.9 billion) from the sale that is targeting local retail investors and major global fund managers.

A formal decision to sell the shares - a process known as T3 - hasn't yet been made although legislation allow the sale passed the parliament last year.

The government is awaiting resolution of a series of regulatory issues, including an agreement between Telstra and the Australian Competition and Consumer Commission on how Telstra's competitors will be allowed to access the telco's existing and future networks.

A ruling is expected in the next few weeks, indicating Cabinet's approval of the T3 sale may be madein early July after the ACCC decision has been scrutinized by industry rivals such as Singtel Optus, Vodafone, and the public. Telstra has warned it may withdraw billions of dollars of new investment if its returns aren't satisfactory, potentially putting it at loggerheads with the government during the T3 sales process.

Trujillo, who is undertaking a dramatic remodeling of Telstra to reduce its reliance on its declining fixed line business, is a former member of the Alcatel Chairman's council.

"Telstra acts commercially in its procurement processes," Telstra chairman Donald McGauchie said in a statement sent to Dow Jones Newswires.

"The company is engaged in the fastest and most dramatic transformation of any incumbent telecommunications company worldwide," he said.

McGauchie admitted the decision-making process on the Alcatel deal was fast but said that was part of the company's transformation process.

"We are making our processes faster and less bureaucratic so they also serve the interests of our customers and shareholders rather than suppliers," he said.

Alcatel Australia had no comment.

(END) Dow Jones Newswires May 23, 2006 04:46 ET (08:46 GMT)

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