It was Sam Chisholm’s backroom antics which helped cause Telstra’s decline and led to the sorry state of Australia’s digital media landscape, reports Michael Sainsbury.
VALE Sam Chisholm, 78, storied media executive who was head of Kerry Packer’s Channel 9 at its zenith, and sealed the dominance of Sky in the UK for Rupert Murdoch — very rare double in Australian media, taking senior roles with both its uber-mavens.
He was a roaring success at Nine when the cheque book and bar were always open, hand in hand for much of it with David Leckie. Yet the business models of both free to air and pay TV are under threat — ironically the latter is under more pressure than the former; Chisholm didn’t see it coming and, frankly, probably didn’t care. A scurrilous theory that has done the rounds for many years is that the head honchos of TV, newspapers and their mates in big advertising may well have known the Internet would eventually eat their businesses but they would by then, like Chisholm, have skipped off into the “old’ media sunset.
One company that could see the change hurtling down the (their) pike, was Telstra and it was Chisholm’s role on the Telstra board from 2000-2004 that was arguably the apotheosis of his career. During his stint, instead of helping Australia’s media landscape adapt to the digital wave beginning to overwhelm it, he made sure it stayed exactly the same.
In executing a one-two punch of remarkable corporate bastardy at what was then Australia’s largest company, he sent ripples through a now much-changed media-comms sector that are still being felt at the time of his death.
Joining the Telstra board in 2000, Chisholm was installed immediately as chairman of Foxtel and was instrumental in giving Foxtel its pay TV monopoly, stitching up a deal with underfunded, poorly managed rival Optus Vision. He was in many ways an obvious choice although at that time nominally a News Corp man, he was sitting on a board of the company News probably loathed the most, its Foxtel partner. It is impossible to overstate the antipathy between the two groups despite their marriage of convenience in Pay TV. Telstra rogered Foxtel with a usurious annual carriage agreement over it’s HFC cable network. In return, News set up Fox Sports without Telstra which was raking in the big bucks well before Foxtel turned a profit.
All the while, Chisholm was not keeping his eye out for Telstra shareholders as per, ahem, the Corporations Act but the interests of Australia’s Packer and Murdoch, who had had made him rich and powerful. After a remarkable double lung transplant and recovery in 2003, he was back in business: leaking to then Channel 9 business reporter Ross Greenwood in February 2004 about a potential tie up between newspaper group Fairfax and Telstra’s Sensis directories business.
The story went ballistica and the idea, characteristised as Telstra wanting to “buy” Fairfax was widely derided by a media commentariat that did not understand the implications of the Internet of their businesses despite watching their own companies spend tens of millions trying to figure it all out
Telstra chairman Bob Mansfield denied that Telstra wanted to buy Fairfax, but told the ABC that the board wanted to see if there were a structure for “doing something with Fairfax that made sense”.
On the face of it, the outrage was justified had the story actually been told with verisimilitude: a majority government-owned company trying to do a deal with a venerable private media company.
With the benefit of hindsight, that could have released value for Telstra shareholders from Sensis, then worth billions of dollars (some valuations were at $10 billion or more), churning $1.5 billion in revenues and $600 million in margins, before its value collapsed. Fairfax was then “only” worth $3.5 billion. Only a decade later, Sensis was sold to private equity for $454 million.
Without Chisholm’s actions, Fairfax may have had the chance of a digital future with Sensis technology expertise if the right structure and managed properly — always a big “if” in Australia media and tech.
But that was just the warm up. Shortly afterwards, Chisholm lead a board revolt against Mansfield (Catherine Livingstone, Charles Macek, Belinda Hutchison and John Fletcher were his co-conspirators) so vicious it lead Mansfield to say something almost unthinkable for an Australian board director: “The bond of trust necessary for the board to operate effectively has been ruptured”. This inevitably lead to the sacking chief executive Ziggy Switkowski.
Mansfield’s replacement – Victorian farmer and veteran of the wharf wars when he ran the National Farmers Federation Donald McGauchie – hand picked little known US telco exec Sol Trujillo as his CEO. Chisholm quickly left the board but McGauchie and his cabal of co-conspirators allowed him to remain chairman of Foxtel even when, in September 2004, he rejoined the board of Packer’s Public Broadcasting Limited. This meant Packer, who didn’t have anything to do with the creation of Foxtel, had his man at the top.
The Trujillo story barely needs retelling — big talking, he brought in dozens of carpetbaggers and consultants who ripped hundreds of millions in fees and salaries out of the company. He picked a fight with the government, cut the company’s share price in half and handed the Labor party the basic plan (written hastily on the back of an envelope) for a national broadband network — for which the government would, of course, pay. They delivered only on the promise of a new 3G mobile network amongst a litany of other promises before he and McGauchie were eventually shown the door in 2009.
The NBN idea, picked up Kevin Rudd and Stephen Conroy, is now reshaping the Australian telecoms sector, but not at all in the way the original creators intended. That’s thanks to the destruction of the once all-fibre network by then Communications Minister Malcolm Turnbull. He needed it off his desk so he could then have a go at rolling Tony Abbott.
Today Telstra’s shareholders are once more underwater after being forced to give up its monopoly on fixed-line networks for a paltry sum, Fairfax is worth diddly squat and Australian consumers are screaming for decent broadband.
In many ways, we have Sam Chisholm to thank for all that.
A shorter version of this article also appeared in Crikey.
Michael Sainsbury is a former China correspondent (now based in South-East Asia), with more than 20 years’ experience writing about business, business politics and human rights across Australia and the Asia Pacific.
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