Communications giant Telstra Corp announced yesterday that its chief executive Ziggy Switkowski would step down early as Australia's largest corporation prepared for its full privatization.
Chairman Donald McGauchie issued a statement following a board meeting saying Switkowski had agreed to quit by July 1, almost two years before his contract ends, and earlier if a successor could be found.
Switkowski, who has a doctorate in nuclear physics and a post graduate business degree from Harvard, has run Australia's dominant telecom since March 1999.
His future, however, has been under a cloud for most of this year following a boardroom row that resulted in one of his strongest supporters, Bob Mansfield, quitting as chairman in April.
Mansfield had supported Switkowski in an ill-fated expansion into Asia which is reported to have cost Telstra some A$3 billion (US$2.31 million).
Switkowski also steered the corporation through a period of intense competition and lagging revenue growth while trying to placate angry shareholders.
Half of Telstra was sold off by Prime Minister John Howard's government in two tranches. The first in 1997, was a bonanza for shareholders, while the second in 1999, was a disaster for investors who paid more for their shares than they could sell them for now.
The board was widely tipped to seek a new chief executive to lead its management team towards the government's expected sale of its remaining 51.8 percent stake which could raise around A$30 billion.
Rumors of his looming departure had swept the market over the past week, pushing Telstra shares up on Tuesday to A$4.93, their highest since the annual results were announced in August. They rose again following yesterday's announcement but fell back to close A$0.02 lower at A$4.91.
McGauchie said the board would immediately begin a wide-ranging search to find a replacement for Switkowski, who he said had successfully led Telstra through a complex and demanding period in the telecommunications industry.
"What we need is a chief executive that we have in place going through the next five years ... as we go through the timetable for the further sale of the company," he told reporters and analysts in a conference call.
He said he believed the government was likely to pass legislation for the sale of its remaining Telstra stake at the end of next year, with the deal likely at the end of 2006.
"At that stage we will be putting a prospectus out as part of a sales process and its important at that time that we can project forward a minimum of three years of service from a chief executive beyond the sale," he said.
Analysts said whoever replaces Switkowsi will face a challenging task in a difficult market.
"They will be working in a very challenging market environment; revenue streams and margins are under pressure, and it will be a tough job, no doubt about it," Macquarie Equities director Lucinda Chan said.
The key issue will be continued pressure on revenue in its mobile and fixed line businesses, over the short- to medium-term at least.
"Telstra will have to show the market that whoever they pick to replace Switkowski will be strong and able to put the company on the right track," Chan said.
"If the share price picks up, that will give the government a chance to offload it," she said.