Reach foray a $5.3b mistake for Telstra
If it had not been for Reach, Telstra might even now be feeling that its foray into Asia was still successful.
CSL, although unspectacular, is certainly no dud, and none of the other Asian ventures - in places such as India and Vietnam - have been big enough to cause too much embarrassment, even if they did not succeed. But Reach has been something else again.
It has been a slow, painful and very public lesson for Telstra and its chief executive, Ziggy Switkowski, that they got it wrong in Asia.
The grand vision of Telstra as a major regional player has been sunk with the submarine cables which are Reach's core asset, into a black hole that one year ago saw the company write its investment down from nearly A$1 billion (HK$5.35 billion) to zero.
The only telecommunications firm to make a fist of being a regional player is, dare we say it, Singapore Telecommunications.
More than any other decision he has ever taken, the Reach investment has been a major factor in destabilising Mr Switkowski's long tenure, and his bid to continue with his contract until 2007.
'I would acknowledge I am embarrassed by the need for these write-downs' were Mr Switkowski's abject words in February last year, when Reach became a zero on Telstra's balance sheet.
These humiliations only add to the sense of urgency for him to swing a reasonable outcome for Reach, even after all the disaster.
It would allow him to save some face, and regain some confidence in the face of the howling pack of analysts and press.
The problem though is, what to do?
Any hopes of investing significant amounts to fund the resurgence of CSL must be on hold, pending resolution at Reach.
Telstra needs the capacity Reach sells, and if it walks away - providing the banks allow - it would still have to buy the capacity from somewhere.
And as a Citigroup note to clients said, the outlook for Reach might look up yet, with bandwidth in increasing demand.
Is it worth recapitalising Reach - even at a reduced 20 to 25 Australian cents in the dollar - and continuing to own an almost insolvent asset, when they can simply buy capacity elsewhere?
It begs the question: should they have ever bothered to commercialise those essentially Hongkong Telecom era assets in the first place?
Either way, the banks will lose and the syndication executives at Barclays, JP Morgan, Citigroup and CSFB, to name a few, will be hoping they are not involved in too many US$960 million haircuts too often.
The reaction of the Australian market yesterday, when more than 45 million Telstra shares changed hands, was an unchanged price at A$4.79. The market view is that the banks will settle for much less than they had hoped, representing a victory of sorts for Telstra.
Investors have heard so much bad news about Reach, they will be pleased if the slate can be wiped clean - even at the cost of angering the banks.
For the banks, the entrance of a buyer for Reach would be a saviour, but while SingTel and China Netcom have been mentioned they may only choose to surface if the Reach partners walk away.