It’s often said that you get you own opinions, but you don’t get your own facts.
Back in the 90’s, the government privatised Telecom. The new owners immediately ramped up dividends while under investing in new technology. The result was a second-rate phone network.
Now, technically it is true that Telecom was privatised in the 90’s, in that it was sold in 1990. (Though this article puts the announcement in 1989.) But in reality, it was the Labour government of the late ’80s that sold it. By saying “Back in the 90’s” this implies that it was the National party who government almost all of the ’90s who did the selling, which is absolutely not true.
So that’s the first sentence.
How about “The new owners immediately ramped up dividends”. To be honest, I have no idea, and it would be sort of tricky to find out since the company was privately owned for several months until it was listed on the stock exchange!
How about “while under investing in new technology”? Well, this one is what we call a weasel statement. Did Telecom invest in new technology? Absolutely. But did they invest enough? Well, what’s “enough”? What standard do you apply?
Certainly they had to pull their socks up. Clear communications came in with a hiss and a roar and started stealing toll customers. So they had to do things like improve their billing from rounding to the nearest minute down to the second to beat Clear’s 6 seconds.
The fact is, Telecom was badly run for years under the government. It was grossly overstaffed for one thing, with maintenance crews comprising of 4 men, only one of whom was usually needed. This was changed so that staff worked one man from a van, and called in another van/man in the rare cases when they needed an extra hand. It had been improved as an SOE, but it was still something of a fixer-upper.
What about “The result was a second-rate phone network.” Actually, the second-rate network was what was privatised.
But the other question is, at what point in the past did private ownership result in a second-rate network? Because we certainly don’t have one now. Idiot’s statement implies that somehow the immediate effects of being sold caused our phone network to deteriorate. But Telecom is today still privately owned and today it’s as modern as any other telco.
When was this supposed low point? He doesn’t say. Of course, he can’t, because he’s relying on people not remembering that under private owners and competition, Telecom’s phone service has steadily improved over the years. It hasn’t been asset stripped under any definition of the word. No one in their right mind would claim otherwise.
But Idiot has.
Tranz Rail was something of a mixed bag. It did well for a while, but it became increasingly clear that rail just isn’t viable in New Zealand. So the labour government of the time bought back the rails for $1 so they could waste billions of tax dollars subsidising it.
(In fact, talking about asset sales being bad is one thing, but how and examination of asset purchases? It is universally acknowledged that purchasing back the trains was a massive fail by the Labour government, grossly overpaying for old trains while Toll was left with the nicely profitable trucking arm of the company.)
But then there’s this:
Now Mighty River Power is signalling that its new foreign owners can do the same to our electricity system, raising its dividends to 110% of profits to provide them a quick buck for stealing a public asset. Its a political decision of course, to make the sale a “success” (for the buyers). And the result will be the same as that seen in earlier cases: the company will be asset-stripped and run into the ground, while the thieves laugh all the way to the Cayman Islands.
Now, it’s perfectly possible that the dividend rise is to make the company look good to sell. But given it’s the government who’s selling, what’s wrong with that? If we get a higher price, it’s a win for the taxpayer.
But for a guy who talks about elections so much, you’d think that Idiot would know that you have to have a majority stake in order to change a company’s policy. Let alone the financial moronicness behind calling an increased dividend an “asset” strip.
In reality, the “new owners” will get the dividend the government majority owners approve, and nothing more and they will have no way of changing that.
Tranz Rail (Toll Rail when it was bought by Labour in 2008) was a viable business. Its core problem was that it competed with road operators largely indirectly subsidised by motorists. Unlike rail, which had to pay the full costs of maintaining its network, road operators pay simply for what they use of the road network at a basic (i.e. at no margin) rate. This problem was resolved in 2004 when the government bought the rail network for $1 (they’d previously paid $20m for the Auckland suburban network in 2002, a bit of a mistake given how cheap Toll sold them the rest of the network two years later.)
Toll paid the government for use of the rail network the same way the trucking companies pay RUCs and fuel taxes. However Labour couldn’t agree with Toll on the ongoing arrangement, (I believe they simply didn’t want to) and a mediator had to be brought in. Then of course Labour began working to buy the whole hog back – i.e. rolling stock, ferries and facilities – and ended up paying twice what Wisconsen Central / Faye Richwhite paid in 1993.
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