Turnbull in conflict of interest investment


news Malcolm Turnbull has disclosed a new financial investment in France Telecom that places the Shadow Communications Minister in a significant conflict of interest situation with respect to the French telco, due to its extensive business operations in Australia through its Orange Business Services brand, including some 240 local staff.

The investment was disclosed recently through the Parliament’s Register of Members’ Interests, which requires parliamentarians to disclose financial investments and gifts. In Turnbull’s latest disclosure, he noted that he had personally made an investment in international telcos France Telecom, Sprint in the US and Spain’s Telefonica.

Speaking to Lateline this week, Turnbull said that he didn’t “obviously” invest in telcos in Australia because of his position overseeing the Communications portfolio for the Coalition. However, he said, ” I don’t have any conflict with France Telecom, and I thought their shares were good value so that’s why I bought them”.

However, although Sprint and Telefonica do not have substantial interests in Australia, France Telecom has long had a substantial local presence courtesy of its Orange Business Services division, which predominantly focuses on providing telecommunications services to multinational companies operating globally. It is very active in the Australian market. According to the company’s website, it maintains sales and support teams “all over Australasia”, including facilities in Sydney, Melbourne, Brisbane, Perth and Adelaide, with “over 240 in-country customer service and operations staff” serving customers.

In addition, Orange Business Services holds substantial telecommunications contracts with major companies operating in Australia. In April this year, for example, OBS’ Australian office revealed it had picked up a five year contract to deliver global networking and security services to more than 280 Rio Tinto sites around the globe. A case study published on its website discloses the fact that it was a key service provider to the Commonwealth Bank in the rollout of its branch network in Indonesia.

“With 1,500 points-of-presence around the world, our high performance global network allows us to provide Rio Tinto with secure services and coverage any time, anywhere, whether terrestrially or over satellite,” said Gordon Makryllos, managing director, Orange Business Services Australasia at the time. “We are committed to providing the highest level of service to Rio Tinto so they can continue in their tradition of operational excellence.”

Although it is not currently believed to be a customer of the National Broadband Network Company, it is believed to be likely that OBS would eventually become a customer of NBN Co in some form, as the network is rolled out, due to the fact that it provides telecommunications services to the Australian offices and branches of number of major multinational companies. OBS is believed to operate in Australia primarily through using the infrastructure of major existing local telcos such as Telstra, on commercial terms. Like other telcos, it is regulated by the Australian Communications and Media Authority.

The Federal Parliament does not currently have a code of conduct with respect to conflicts of interest. However, the Federal Government’s code of conduct for ministerial staff states that such staff are required to “divest themselves, or relinquish control, of interests in any private company or business and/or direct interest in any public company involved in the area of their Ministers’ portfolio responsibilities”, which would preclude any of Turnbull’s staff from holding investments in France Telecom, due to its operations in Australia.

Telefonica is not known to have operations in Australia. However, Sprint does have several points of presence locally (see a network map of the company’s Australian assets here) relating to its substantial international Internet backbone assets, known as Sprintlink. The company has links along the west and east coasts of Australia, ranging from Perth to Sydney and Melbourne.

In addition, the US, Sprint is a direct competitor to AT&T, which, like France Telecom, does have substantial operations in Australia targeting multinationals, with facilities in both Sydney and Melbourne and a local presence since 1992. The company’s website (PDF) notes that its Australia-based customers include “many of the major Australian multinationals: “Australia is also the service delivery work centre supporting the entire Asia-Pacific region,” AT&T Australia’s site states, “and the main hub for the enablement, implementation and management of AT&T’s client networks across Asia-Pacific.”

There are also potential indirect conflicts of interest relating to Turnbull’s investments in the three international telcos.

For example, Communications Minister Stephen Conroy was appointed in 2010 to be a founding member of the United Nations’ Broadband Commission for Digital Development. It is not clear whether Turnbull would also hold that role, should the Liberal MP become Communications Minister in a Coalition Government. However, César Alierta, the long-serving chairman of one of Turnbull’s investment targets, Telefonica, also sits on the Commission.

Turnbull has also come under fire with respect to the investments for what some have seen as an investment position at odds with his political views.

Lateline presenter Emma Alberici noted during her interview with Turnbull this week that France Telecom is rolling out fibre to the home to some 15 million premises in the country, in a similar deployment to Australia’s own fibre to the home NBN rollout. Turnbull sees the NBN deployment as being overly expensive, and has repeatedly emphasised he would prefer a more inexpensive fibre to the node style deployment, similar to the deployment being carrier out by BT in the UK.

“Why have you made that investment?” Alberici asked Turnbull. “Obviously you think their strategy is a good idea, and yet you don’t think the Government’s same strategy in Australia is a good idea? It’s curious. But you haven’t equally bought shares in British Telecom, which is the company you’ve just been telling us is doing the right thing in not taking fibre to the home?”

In response, Turnbull that as an investor he was focused on investment returns. “I’m not making political statements every time I make an investment,” he said. Alberici fired back: “The Government is considering investment returns, isn’t it, by taking fibre to the home and owning the infrastructure company, or owning the majority of shares in the infrastructure company, that achieves that?”

In a separate exchange on Twitter with telecommunications journalist David Braue, Turnbull was asked whether buying France Telecom shares implied there was profit to be made from fibre to the home rollouts. “Not necessarily,” said Turnbull. “Their FTTP rollout is pretty modest and I thought the shares were good value.” Braue subsequently lampooned Turnbull’s share buying habits in a commentary on ZDNet. “Turnbull’s position on socialism is now clear: Australian socialism is evil, but French socialism is a great investment,” he wrote.

In a media statement, Communications Minister Stephen Conroy heavily criticised Turnbull for what he said was “rank hypocrisy”, saying it was time for the Liberal MP to “put his mouth where his money is and back fibre to the home”. “Mr Turnbull wants to spend billions of taxpayers’ dollars to fund the Coalition’s second-rate fibre-to-the-node network, but when it comes to his own money he is more than happy to invest in fibre-to-the-home,” Conroy said. “This is rank hypocrisy by Mr Turnbull. He is trying to lock Australians into an inferior broadband network, while investing to future proof France’s digital economy.”

“It is time Mr Turnbull put his mouth where his money is by supporting Labor’s roll out of the NBN’s fast, affordable and reliable broadband to all Australians. If Mr Turnbull truly believes that British Telecom’s fibre to the node network is the best broadband model, why doesn’t his updated registry of members’ interests show recent investments in BT?”

In a further defence of his French investment, yesterday Turnbull published a statement on his website inviting those questioning it to examine why France Telecom was able to deploy fibre to the premises “for one twelfth of the cost of the NBN”, stating that the speed and cost-efficiency of the France Telecom FTTH rollout made Australia’s NBN Co “look even more like a snail”. “If FTTP could be built in Australia for costs comparable to those stated above, there wouldn’t be a debate about doing it,” wrote Turnbull. “It is not a question of FTTP vs FTTN in abstract, it is a question of the relative cost and benefit of each technology in each market.”

Although there is currently no concrete code of conduct for Australian ministers in the Federal Parliament that I have been able to find, I personally believe it is a substantial conflict of interest for Turnbull to hold shares in a telecommunications company, France Telecom, which has substantial assets and hundreds of staff in Australia, and another company, Sprint, which has network assets here. I note that the Federal Government would not permit Turnbull’s staff to hold such shares, were he to become Communications Minister.

I believe it would be appropriate and sound political practice, for Turnbull to divest himself of any financial interests he or his spouse Lucy Turnbull holds in any telecommunications or technology-related companies of any kind. Should he not do so, media outlets will continue to bring up these investments in relation to his political role; Turnbull will be unable to discuss international telecommunications affairs without his financial interests being mentioned and questioned.

There are plenty of non-telco investment options out there; I do not believe Turnbull needs to apply his professional expertise in the telecommunications and technology sectors to find some decent ones. In view of the extreme difficulty of picking and choosing individual winners in the stock market over an extended period of time, my personal recommendation is that Turnbull place more of his money in index funds; which have been shown to be one of the most reliable long-term investments. Alternatively, government bonds and property are also usually safe bets. A good starting guide for interested investors is Benjamin Graham’s excellent tome The Intelligent Investor.

Image credit: Office of Malcolm Turnbull


  1. OMG!!! OMG!! Just how much profit will French Telecom make from Orange in Australia?? And just how much will Malcolm Turnbull benefit from his OBVIOUS conflict of interest. Given that there are 400 staff in OZ, and 170,000 Orange staff elsewhere in the world the implications are huge. No doubt most of that 46.7Billion Euros earnt in 2010 by Orange came from their ‘totally insignificant’ Australian operation.

    • I take your point John, but the fact remains that this kind of investment would not be allowed if Turnbull was a ministerial staffer — so why should it be allowed from a politician who may become Communications Minister?

      • Renai, I do appreciate the issue, but I just wonder if it is really a significant conflict of interest situation . In other words, just how conflicted would Turnbull be as Telecomms Minister, by his investment in French Telecom? What decisions would he be making in Australia that would see him profit in any meaningful way from Orange (Aust) profits returned to Orange (France) which then distrtibutes to French Telecom, which then distributes to MT based on his shareholding. I doubt there would be any Australian opportunity for Orange (Aust) that would see MT ‘conflicted’ by his shareholding in French Telecom. Additionally, I would equally see the same of any shareholding that Conroy might have in any foreign Telecoms holding of similar scale.

        • Extremely easy question to answer, John.

          The Singaporean Government has a huge financial stake in Australia courtesy of its interest in SingTel, which owns Optus. Telefonia and France Telecom have expanded similarly into a large number of other countries, outside their home countries of Spain and France. What if a situation arose where one of this pair became interested for bidding for Australian telecommunications assets, as when SingTel bought Optus?

          Seems a no-brainer to me.

          • Whoa! “In 2001, SingTel paid A$14 billion to buy Optus. At the time it was Australia’s largest corporate takeover; it was also SingTel’s largest ever investment; and I believe it was also Singapore’s largest ever foreign investment.” Paul O’Sullivan, Optus CEO,
            That’s a pretty big ‘what if’ and a long way from a trivial investment of 400 staff (0.2%). But it gets back to my point, MT would not be conflicted by his current investment, and it would take a major acquisition for even the perception of a COI to arise. At which time I’m sure that MT would relinquish his shares and happily take $15-20B of investment from French Telecom into the Australian Telecommunications industry (a highly doubtful occurrence as the French have little to no interest in Australia at all).

          • Our company is owned by Rexel (they also own many others), Rexel is a french company, we suppy NBN pits and conduit to contractors. Clipsal Australia is owned by scheider, which is owned by the french. To say the french aren’t interested in Australian electrical or telecommunications is complete rubbish.

          • “it would take a major acquisition for even the perception of a COI to arise”

            I don’t think the Opposition of the day would wait for a major acquisition to start hammering Turnbull on this kind of thing.

          • I would also disagree that there is any magical threshhold where a conflict of interest suddenly matters. The only politically sensible stance is to have zero conflict of interest.

            Anything else makes Malcolm susceptible to the wrong sorts of perceptions. Conflict of interest is as much about percieved conflicts as real ones. People will see this as an unacceptable conflict – it doesn’t matter who thinks that they should or shouldn’t percieve it differently.

        • Conflict of interest can be real, or perceived. You dont need an ACTUAL conflict of interest for it to be an issue, just the chance that it MIGHT be an issue.

          If MT is making plans and decisions that provide any advantage to a company he holds shares in (in this case France Telecom), whether or not his intent is to make money for that company, its a conflict of interest. Thats where the problem is, not the size of the company or its disbursements. The realised profit to MT is secondary to the potential itself.

          The Liberal NBN plan, what we know of it, provides an increased opportunity to France Telecom, if only in the field of mobile services. Smaller fixed line footprint vs larger mobile services footprint. As small as that might turn out to be, its still a conflict.

        • John Pollard says: “I just wonder if it is really a significant conflict of interest”

          The quantity or value of the conflict of interest or investment is not the issue.

          The issue is the investment itself exists and that a conflict of interest might exist.

          We have seen many times where those in positions of authority commit relatively minor offences and end up get “the book thrown at them” as an example of the higher standard to which they should hold themselves.
          (Note that I am not implying that the investment is illegal in any way.)

          It is critical that those in positions of authority hold themselves to a higher standard.

          • The quantity or value is indeed the issue. “A conflict of interest is a set of circumstances that creates a risk that professional judgment or actions regarding a primary interest will be unduly influenced by a secondary interest.” Unless the quantity or value is such that it creates the circumstances that lead to the risk of affected judgement, then there is no conflict. Period.

          • It doesn’t matter whether you think it is a conflict of interest or not. It matters whether the public percieve it to be one. They won’t bother to pick up a text book, they will simply look at it and say ‘that is a bit dodgy’.

            This isn’t about whether he should divest because of a real conflict, this is about the political reality that he should divest to remove the certain public perception of a conflict.

        • John Pollard, you are probably correct!

          However, as seems to be the case in Australian politics today (especially a speciality of of Tony Abbott, imo), the size of the discrepancy and even the “small fact” that a discrepancy may not even exist, simply doesn’t matter.

          The aim is to go straight for the jugular (personally I think it may inevitably cost TA the PM-ship, because people are starting to tire of the endless beat-ups, negativity and muckraking) but I digress…

          Look at Mike Quigley for example, exonerated of any wrong doing with AL but that still hasn’t stopped Turnbull himself (ironically with a similar GS legal matter under his belt) from trying to discredit Mr Quigley.

          These people have set the rules John and imo, live by the sword.

      • “so why should it be allowed from a politician who may become Communications Minister?”

        Two possibilities:

        1. Turnbull is not planning on the coalition winning the next election (maybe he realises they cant win with Abbott)
        2. He’s not planning on being the next communications minister even if they do.


  2. This is a curious oversight from a man who would lead this country. The only politically savvy thing to do would be to divest himself of his shares as a matter of priority.

  3. I disagree that he should be required to disinvest. Such a requirement would exclude the very people with expertise and proven success in these fast changing fields.

    If Malcolm has a good technology portfolio (of investments), then more power to him. So long as relationships are disclosed, and decisions subject to scrutiny, tech investments are fine.

    In practical terms, too, it would be extremely difficult to define the areas not affected by a Miinister’s portfolio. For example, a telecommunications Minister’s decisions as to access would be extremely valuable to property developers.

    • The point here is, say Malcolm came to be the Communications Minister in a hypothetical Coalition government, and he awarded a swathe of tender work to Orange Business Services.

      The question will then always be did he award that work to bolster his investments interests or not?

      That’s the problem, and that’s why the rules about disclosure and divestment are in place.

      • Suffice to say that ‘should’ Turnbull become communications minister, he would have to re-evaluate his share portfolio and relenquish any conflicting holdings.

        • Indeed.

          Equally, he should consider doing so now, given his aim to not have any potential conflict with the Australian telecommunications industry.

          As it stands, he does.

          His aim is to not.

  4. Furthermore, if MT ‘obviously’ doesn’t invest in Australian telecoms, this would imply that any investment, regardless of size or location on ‘the fringe’ would hold the same murkiness and therefore, conflict of interest.
    As someone who works in the field of finance, I recognise Conflict of Interest as a greasy tight-rope at the best of times and MT should almost certainly be encouraged to err on the side of ‘just walk away’

    • Further more, they are planning 100% coverage by 2025:


      “After implementing a policy for fiber installation and network sharing in urban apartment buildings, France has embarked on a plan to bring fiber access networks to the country’s lower-density areas. This strategy for low-density areas is part of France’s plan to provide broadband access to 70 percent of the country by 2015 and 100 percent by 2025.”

      2025 – 2007 = 18 years

    • That is an A1 gold plated bit of information. Well done..

      Broadly the only difference in risk between France Telecom and the NBN is that in the early stages the NBN is coming off zero income for massive capital investment.

      If the NBN isn’t overpriced like Telstra was when they eventually privatise it I would invest in it for a predictable 7% franked yield.

      Even better, Malcolm could swap out Govt investment for NBN Bonds and let businesses and individuals decide for themselves if they think it’s a good investment – I’m sure there’d be plenty of institutional support.

      The main problem is that like all the people that bought Facebook shares, people don’t understand the business. In the same way they saw Facebook as this massively valuable entity they see wireless as this massive risk to the NBN. Of course once the figures started rolling in on Facebook people lost their shirts, and if they understood exactly why wireless is growing a lot slower in volume terms than fixed broadband then they wouldn’t be bothered by it as a risk to the NBN revenue model.

      Instead it gets simplified to ‘I know lots of people on Facebook therefore it must be worth a lot, and everyone has a smartphone and/or tablet these days so therefore fixed line broadband is dead”.

  5. Conflict of Interest may not be the main issue here.

    Perhaps Conflict of Credibility might be something to examine, though, since it appears Malcolm is rubbishing the NBN on the grounds that we don’t need FTTP, while personally investing in a company which has made a commercial decision to roll out FTTP.


  6. “In view of the extreme difficulty of picking and choosing individual winners in the stock market over an extended period of time, my personal recommendation is that Turnbull place more of his money in index funds; which have been shown to be one of the most reliable long-term investments. Alternatively, government bonds and property are also usually safe bets.”

    Congratulations to Delimiter on obtaining its Australian Financial Services Licence (AFSL)!!!

    (I’m just having a little trouble finding the actual licence no. listed on this website.)

    • Yeah I wasn’t going to mention it but it was at best cheeky and at worst a bit of a shocker giving investment advice to Malcolm Turnbull the former investment banker. And Index funds… lulz.

  7. Wish you guys would stop picking on Turnbull. The investment is insignificant. France Telecom are not significant downunder

    We can’t expect a politician to be that knowledgeable about the technology. From what I know Turnbull is credible and would certainly do more than a costs benefit analysis on the back of a coaster as his opposite is reputed to have done.

    Lets give him a break and cocentrate on making the Minister do his job properly

    • The investment is one thing, and not that important until he takes office, but to invest in a company that is doing an almost identical FTTH rollout across France for similar kinds of expenditure despite his pretence that it’s only a much smaller rollout is an absolute shocker.

      It says either that he does not believe an Australian commercially operated company, the NBN Co Ltd. can make money doing the same thing a French company is doing, or that he’ll say anything to get into power.

    • I… He… You… Wait, what?

      I hope thats sarcasm Greg, because every sentence is wrong. France Telecom IS significant in Australia, Their global links, including being a big provider for Rio Tinto, for starters. 400 people from their global empire isnt a large amount, but there are other telcos and ISP’s that have around that many in Australia

      As for expecting him to be knowledgable about the technology, well thats pretty much the point with MT. He has significant experience in the IT industry (try doing some research), which gives him enough credibility that we listen to him with some respect.

      As for the ‘back of a coaster’ remark, again I hope that was sarcasm. The basics of the NBN were outlined on a napkin, according to lore, so I’m not quite sure where you FUD’d up the CBA angle.

      How about this, lets NOT give him a break, and hold him accountable in the same way every other public service member is held accountable? We all have to declare conflicts of interest, perceived or real, regardless of the size of our involvement.

  8. If you want an example of how these things are beaten up, just look at the Julia Gillard issue from 17 years ago.

    Investigated, no issue found, yet the mere fact there was an investigation at all is enough for people to call for her head?

    Thats the sort of sensationalising that happens when things are shown to be fine, what do you think would happen if even the suggestion of impropriety existed? Thats where conflict of interest comes into it.

  9. Malcolm Turnbull is comparing the cost of rolling out a network in France and in Australia? Where do you want to start with the variables involved and the different costs?

    Malcolm, tell that idiot party leader you have to put up with to shut up, and start supporting what you know is the right thing.

  10. I don’t think Conroy and Labor could hope for a better “journalist”.

    Let’s not confuse experience and a genuine interest in the industry with “conflict of interest”.

    When are people going to start to question NBNCo’s “transparency” around selecting Alcatel for the bulk of its CPE?

  11. Sorry Renai, but I think your inclusion of the image of Turnbull ‘down on farm’ is inappropriate.
    Impersonations of a ‘funky chicken’ has little to do with telecommunications. ;-)

  12. Reply
    Abel Adamski says:
    Your comment is awaiting moderation.
    August 23, 2012 at 9:46 pm


    “However, capturing the business market for the NBN could provide a saviour for Macquarie Telecom’s falling telco revenues.

    Chris Greig, group executive of Macquarie Telecom’s telco business, told Computerworld Australia it plans to bring NBN business plans to the market in October this year.

    While the company is still working out the finer details of what its plans will comprise, he said existing business clients have already shown interest in switching onto the NBN once it is available.”
    “He said so far companies are considering two options for the migration to the NBN. “There are some customers who have said, ‘I want to wait for the whole NBN to roll out across my sites and then I’ll do one project’. Then there are a number of others who have said, ‘I want to plan to roll it out as it comes through in my territory’,” he said. ”

    Read the whole article. No demand?, No demand for the up to 1Gb capability which will be lifting the ARPU and lowering wholesale prices and guaranteeing the ROI for the NBN.?

    Then compare with the reports on the same report in the AFR and News Ltd. rags


    Then we have the CBA putting in their rwo bobs worth

    Methinks the supposedly pro business Coalition doesn’t have a clue what the needs of business and the economy actually are their Playschool imitation NBN just won’t cut the mustard, so focussed on Video purely because of the threat to their masters Pay TV monopoly, economic incompetence

  13. I don’t think there’s anything hypocritical at all about Malcolm owning shares in a French private telecom laying FTTH. As he says, they are a good investment. The company will pay him nice dividends earned from high-speed fibre laid wherever it finds it is profitable and save money by not provide it to those places where there is no payoff. Malcolm has the same attitude in Australia. He is equally happy for the shareholders of Telstra and other telecoms to profit from the broadband business here too, even if he can’t own any shares in them.

    No inconsistency or conflict there.
    Cherry picking is good for business.

    The problem though is that he is aspiring to be the future Minister of Communications, not the Minister of Telecom Shareholder Profits. His job is to provide the better comms at the best price for ALL Australians, not just the best business deal for the telecom corporations.

    • Wrong. Firstly, most of those FT corporate profits are coming from wireless and services, not from FTTH.

      Secondly, Turnbull’s job is to get elected, and beyond that to try and get into government. It is entirely a matter for the people who vote for him to decide anything beyond that. He has a duty to make his investments visible to the voting public, and he has done that.

      • I thought the idea was for the opposition to come up with superior and positive policies for all Aussies and thus in turn, get themselves elected.

        But apparently, they now just skip the middle bit and aim to simply get elected in any way they can.

  14. “Alternatively, government bonds and property are also usually safe bets”

    You forgot to mention, the Australian Government is now offering bonds at a secure 4% yield (way above inflation due to the good economic management if the Australian Government). Malcolm might find them a great investment.

    (that’s the ones funding the NBN…)

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