Telstra takes swipe at Vodafone, urges shareholders to protest domestic roaming changes

Speaking at the telecommunications group's annual general meeting in Sydney on Tuesday, Mr Mullen said an Australian Competition and Consumer Commission's inquiry into domestic roaming, launched last month, posed a threat to shareholder value and urged investors to make their concerns known to the regulator.

The ACCC is asking industry and consumers whether it should "declare" domestic mobile roaming services. If it proceeds, Telstra will have to let competitors' customers on to the Telstra network in regional and rural areas.

Telstra is opposed to the plan because it has spent billions on its mobile network and uses it as a major point of difference to other telcos. But Vodafone, farmers and regional groups want to see reform. Optus supports the status quo.

"Over the past year, we invested $4 billion in capital expenditure into our fixed and mobile networks and we have now achieved 98 per cent population coverage with 4G and are on track to reach 99 per cent population coverage by June 2017, if the regulatory settings for such investment remain favourable," Mr Mullen said.

"One of our competitors is seeking regulation to close this competitive gap by cheaply riding on our network to avoid spending their own money.

"One can understand why some competitors would lobby for this – it would be a free Christmas present."

Mr Mullen said management had been modelling all possible roaming options the ACCC could choose and was very aware of the potential financial impact on the company.

Telstra's executives and board were "carefully explaining these effects to the ACCC", Mr Mullen said.

"If the ACCC decides to declare mobile roaming, it would absolutely be at the expense of you, the Telstra shareholders," he warned.

"If you do feel strongly we would suggest that you make your views known to the ACCC."

Chief executive Andrew Penn told shareholders that "Telstra has disproportionately invested in regional areas to cement our place as the No.1 network for coverage and quality in Australia".

Telstra's "competitive dynamic" and the government's mobile black spots program would be put at risk if the ACCC's domestic roaming proposal proceeded, he said.

The principle advocate for mobile roaming is a foreign company that has chosen not to invest to the extent Telstra has," he told shareholders, alluding to Vodafone.

"We are hopeful, for the benefit of all Australians, that this foreign company's regulatory campaign will not succeed."

Vodafone's chief strategy officer, Dan Lloyd, told BusinessDay Telstra's mention of its foreign owners was a "cheap shot" and distraction from the very serious issues at hand. Telstra's revenues could increase from regulated roaming, he added.

"This would involve significant payments from other companies to Telstra and the ACCC will try to determine the price that would give Telstra a reasonable rate of return [on their investment]", Mr Lloyd said.

The ACCC is required to take account of what is in the best interest of consumers, not Telstra shareholders, and there is "a very strong case" in favour of domestic roaming, Mr Lloyd added.

Vodafone Hutchison Australia (VHA) is jointly owned by British multinational Vodafone Group Plc and Hutchison Telecommunications (Australia), which is majority owned by Hong Kong-listed Hutchison Whampoa.

Mr Lloyd recently said domestic roaming was already enforced in the United States, Canada, and New Zealand and there was no evidence it had a negative impact on infrastructure investment in those countries.

He added that Mr Mullen's analogy of an airline reserving half the seats on a competitor's plan was an excellent one, which proves Vodafone's point, given the widespread use of code sharing by airlines and regulated access to airport infrastructure.

But a Telstra shareholder told the company's AGM he was greatly concerned about the "unjustified raid on the company's assets by an overseas controlled company".

"Would it not be very, very wise for every single shareholder and their friends and their family to contact not only their lower house parliament but every single senator and tell them that we would be horrified and would demonstrate that horror in the appropriate way as electors if the government allowed a raid on Telstra's assets," the shareholder said.

Mr Mullen clarified the decision rested with the ACCC, not the government.

Another shareholder said VHA wanted a free ride.

"All of you will pay the price" if domestic mobile roaming services were "declared", the shareholder told the meeting. "And it's wrong. Absolutely wrong. I would like to go even further than that - it's criminal."

Telstra's shares were trading at $5.07 on Tuesday morning.