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