Page last updated at 02:18 GMT, Tuesday, 15 September 2009 03:18 UK

Government demands Telstra split

Phone box, Coober Pedy, Australia July 05
Telstra's fixed line revenue is dropping

The Australian government has strengthened its demand for the country's biggest telephone company, Telstra, to break up.

Telstra is being asked to split its retail operations from its wholesale network.

The government says this would help in the roll-out of a national broadband network worth A$43bn ($30bn, £20.9bn).

The government has been warning of a major regulatory shakeup of the telcoms industry.

"It is the government's clear desire for Telstra to structurally separate, on a voluntary and cooperative basis," said Communications Minister Stephen Conroy.

Telstra has not yet responded to the demand.

Cable tangle

Telstra was a state-owned monopoly before it went mostly private in 2006.

It owns the country's aging copper telecommunications network.

This could be made redundant as the government pursues its plan for super-fast broadband across the country.

Roll-out of this new network would go faster if existing telecommunications providers folded into it.

Legislation underpinning the network was unveiled by Mr Conroy and is to be submitted to parliament.

It gives stronger powers to Australia's competition watchdog and bars Telstra from additional wireless spectrum until separation is completed.

The plans will also force Telstra to sell off its cable network and interests in pay TV arm Foxtel, and prevent it from acquiring additional mobile spectrum.

Telstra shares slumped shortly after the announcement.

Profits drop

Last month, the new chief executive of Telstra, David Thodey, downgraded earnings targets despite a 10% rise in profits over the year to June.

Telstra's mobile operations have been doing well but profits on fixed line business is dropping.

Mr Thodey said in August that Telstra was "engaging constructively" with Canberra on the new nationwide network plan.

But he added that Telstra also had a duty to look after shareholders.

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