Saturday, February 04, 2006

Editorial: Why we did not run those cartoons

Newspapers in Europe and elsewhere have quickly made common cause with the Danish paper that printed cartoons depicting the prophet of Islam and brought the wrath of Arab states upon the head of Denmark. The country has been the target of street demonstrations, flag burnings, death threats and a consumer boycott of Danish goods in several Gulf states. Denmark's Prime Minister has expressed alarm, and the editor of the offending newspaper has said he would not have published the material "had we known it would lead to boycotts and Danish lives being endangered".

The editor perhaps ought to regret his decision to publish but not for the reasons given. To withhold material for fear of retaliation is truly to surrender the freedom of the press. A better reason for the editor's regret would be that, too late, he has realised the gratuitous offence his newspaper has given. Even that reason would be too much for some of the editors who have rushed to reprint the cartoons in a cause that one of them has called "the right to blasphemy".

When any right is invoked, it can be hard to keep your head. As soon as an issue is framed as a test of press freedom, the temptation is to publish for no better reason than to assert that freedom. And in some circumstances, where the threat is real, that might be reason enough to publish. But in this country, and most others where newspapers have strutted a hairy chest on this issue, Muslims are a small minority of the population and we are free to offend their religious sensitivities if we want to.

The only question to consider is, why would we want to? Humour is one good reason, and it can be the hardest subject to treat responsibly. Humour, especially when it carries a social comment, will often poke fun at things some people hold dear. But there have always been boundaries of taste that publications in a free country can largely set for themselves. Cartoons that set out to give offence for no redeeming purpose leave a nasty taste in the mouths of most people, and media with mass circulation publications generally avoid them.

Cartoons that simply make fun of a minority's racial characteristics or sexual orientation are likely to fall foul of the law these days. Should religion have the same protection? Some Western countries have had this debate recently, and defenders of free speech have rightly made a distinction between religion and race or sexuality. Religion is not an innate characteristic like the others. Religion is a commitment of choice. It is also an assertion of beliefs, attitudes and rules of conduct that other people must be free to question, criticise and lampoon if they wish.

The cartoon in the Danish case could have been quite justifiable in the context of a debate. To publish them simply to illustrate the debate about their publication is an option open only to those who believed their original publication blameless. We do not. We ask the question, would we insult Christians simply to prove that we have a right to do so?

Islam and Christianity are similar monotheistic religions, but there is one big difference. Christianity is based on belief in a God who took human form in Jesus Christ. Islam's human vehicle, the prophet Muhammad, is not part of its deity. Islam never depicts its God in human form, nor its prophet. To enter a mosque is to be struck by the utter absence of any image of a human figure, which Islam treats as idolatry. This might not be widely known in the West, but news media should be getting better acquainted with Middle Eastern values.

There is plenty in Islam to question, criticise, satirise and cartoon, as there is in any religion, without giving offence for its own sake. No question of press freedom arises here. When events call for critical or humorous comment on any religion, we reserve our right to publish it.

John Armstrong: Key man just won't go away

It is one of the oldest tricks in the book - one which brings back memories the National Party would prefer were long dead and buried.

When Jim Bolger was struggling as leader in the late 1980s and Winston Peters was National's rising star, the latter made it his habit to turn up late to party conferences.

His arrival on the conference floor was guaranteed to create a commotion among delegates, thus providing the required visual fodder for the evening's television news bulletins. It was also a pointed reminder to the party hierarchy of who was popular and who was not.

So when John Key conspicuously turned up late at Don Brash's Orewa address on Tuesday night, there were bound to be some raised eyebrows.

Those suspicious of the leadership intentions of the ambitious Helensville MP will have regarded his tardiness as a blatant attempt to upstage Brash.

Key, who blamed the failings of his car's satellite navigation system for his being delayed, was probably unaware he was literally following in Peters' footsteps.

Whatever, the leadership of the National Party is a story that refuses to die. Although MPs dismiss speculation of a change some time in the next 12 months as a media beat-up, there is no question there is plenty else going on behind the scenes.

Accusations are coming from within the party that Key has been "positioning" himself for the leadership too overtly. There are whispers that some Key supporters in the party in Auckland have been feeding the media speculation and, as a consequence, Key has been told by caucus colleagues in no uncertain terms to pull his head in.

However, the whispers may be deliberate warning shots to Key not to make a move on Brash. The word is being put around Parliament that the caucus will not tolerate undermining of Brash through a "campaign of destabilisation" - a phrase becoming common currency.

What is clear amid all the murk is that National's three-day caucus in Taupo next week will need some kind of discussion about how to stop all this distracting National from its primary focus - attacking Labour.

Not helping things was Rodney Hide. The Act leader is a close friend of Brash, but he did his National counterpart no favours this week by suggesting Brash was being destabilised by some of his MPs.

Hide, of course, was resorting to another old trick - a small party struggling for attention knows it can get publicity by exploiting the internal troubles of its larger would-be coalition partner.

Hide's claims in his state-of-the-nation speech only succeeded in giving the story fresh momentum after Brash had once again tried to put the matter to rest at Orewa two days earlier with an emphatic statement that he would be staying on to fight the next election.

Hide was right about one thing: the speculation over Brash's leadership risks becoming a self-fulfilling prophecy.

That will not happen in the short-term. There is no immediate threat to Brash. He will be judged on the basis of his performance through the year, the polls and, ultimately, whether his colleagues fear keeping him will see the party end up in Opposition for another three years, making it an intolerable 12-year stretch in total.

The leadership speculation has prevented Brash getting the year off to a flying start. But it has not necessarily been helpful to Key either. His caucus colleagues may already feel they are being manipulated towards a decision to dump Brash when they do not want to.

Senior MPs whose interest is in blocking Key - Bill English and Gerry Brownlee are the obvious ones - will play on that resentment.

Additionally, by flagging the economy as National's No 1 priority, Brash's Orewa address has placed huge pressure on Key as finance spokesman. He has to deliver the goods in his portfolio on a level befitting the reputation others have bestowed upon him.

He has to come up with fresh ideas that can be developed into workable and attractive policy.

But not immediately.

National is staring down the barrel of three more long years in Opposition. It has to pace itself. There is no point dishing up fresh policies that will be nabbed by Labour if that party can possibly get away with doing so.

Although Labour rubbished Brash's dissertation on the economy for offering "nothing new", that was water off a duck's back as far as National was concerned.

The easy option would have seen Brash pick another highly contentious topic as the focus of this year's Orewa speech. However, the party chose not to be populist - one reason why Brash's warning that immigration policy is attracting the wrong type of migrant was toned down and kept vague.

National's strategy this year is to make the transition to Government-in-waiting - and that entails being seen to be seriously analysing the problems facing the country rather than just being reactive.

It means being more than a one-trick pony relying on tax cuts, especially if the economic slowdown bites into the Budget surplus severely enough for Labour to persuade voters that substantial tax cuts are not feasible.

If National wants to be taken seriously, it has to be seen seriously debating less than enthralling issues such as worker productivity.

To kick things off, Key is planning a series of "stocktaking" speeches on elements of economic policy with the intention of addressing the "hard questions" needed to lift the economy on to a new level where the country is not so vulnerable to cyclical movements in international commodity prices.

The stakes are high for Key. The Prime Minister's talk of "economic transformation" has Labour competing in the same territory - but with all the resources of the public service at its disposal to generate solutions.

But the stakes are even higher for Brash. He is taking a big risk by going so hard on the economy.

National's private nightmare is that the downturn is only brief and Labour's handling of it further enhances its credibility as a competent economic manager.

Overriding everything is Brash's doom-and-gloom warning that the country is "almost certainly" headed for recession.

Fine for Brash if that eventuates. But what if it doesn't?

The buck will stop with Brash - not his finance spokesman. Key, in the meantime, would do well not to rely so much on his Navman to get him to wherever he is going .

John Roughan: Founding pact for the sake of two nations

I love Waitangi Day, love it for the history that hangs in the air and the tension that radiates from the Treaty grounds no matter what happens. I don't want the fireworks and frivolity of Australia Day, I prefer the truth.

I love it that we are haunted by a founding pact we can barely explain. I spent months last year studying other states established by British colonialism and none were quite like us. Treaties were made with other tribes of other places but not in the spirit of ours.

This country was not to be colonised without the consent of the natives. The chiefs who signed the Treaty probably did so for the sake of peace, good government and reliable law, all of which had become scarce commodities in Maori society since the arrival of firearms.

The convulsions the "musket wars" caused have been an unfashionable subject of historical research, but nothing else explains why powerful people would hand so much authority to the distant ruler of a tiny white minority.

Quite what sort of authority they had in mind is still a matter of academic debate. Possibly the chiefs imagined they were simply signing up with the British Empire, the most powerful entity in the world at the time, and could retain the kind of sovereignty that people of distinct ethnicity generally enjoyed in European empires of the 19th century.

Some Maori had travelled. They had seen a world that was not yet ruled entirely by nation states. Most of Europe was still governed as it had been for centuries, by imperial dynasties such as the Habsburg and Ottoman.

Those empires, when you study them today, were surprisingly liberal. For a long time they had been able to satisfy many different ethnic and religious constituents by according them a high degree of self-government.

The distinct ethnic strains spoke and wrote of themselves as "nations" without challenging the empire's authority overall. In fact they took pride in both their cultural nationality and their participation in a larger cosmopolitan state.

Habsburg Vienna, for example, was one of the cultural capitals of the age and Czechs, Jews, Hungarians and others were as prominent as Austrian Germans in its literary and political life.

Nationalism as we know it developed later in the 19th century, when liberal thinking decided that no nation was free unless it became an independent state.

During the 20th century that idea became so entrenched that the terms nation and state are now commonly used synonymously and it is inconceivable to most people that their state could comprise more than one nation.

But in 1840 all of that was still to come. When Maori looked around the globe at that time they saw not only the liberal empires of the European continent but free colonies on the Australian mainland where the Queen's writ was orderly without being oppressive.

That, I suspect, is what they signed up for. What they got was that, and much more. Namely, immigrants. Many more than they can have imagined.

It is easy to say in hindsight that they should have seen what would happen. But power can blind people to potential danger and the Maori who signed the Treaty still held power. They probably felt they could control any consequences.

By the time they realised what was happening the die was cast. A few rebelled. Most tried to make the best of it. Perhaps they decided that law and government were still preferable to what prevailed before.

But Britain soon handed government to the settlers and the law turned out to be an instrument for the division and transfer of land.

That's the truth. But the Treaty survives. It probably has a higher place in our consciousness now than it has ever had, and that is true of both sides in the debate over its meaning.

Don Brash will be at Waitangi this week because he thinks the Treaty made us one nation. Many Maori are there because it enshrines their sense of a distinct national sovereignty.

Early in his address at Orewa this week Brash re-affirmed his belief that "race" has no place in the decisions he would make for New Zealand.

Near the end of the speech he intimated his party would propose greater restrictions on immigration to preserve "our common values".

I got a chance to tell Brash directly this week that it doesn't really matter what he thinks or what I think. If Maori think we are not one nation, we are not.

If Maori are a nation they will organise themselves politically to give independent expression to themselves in the New Zealand state. They have now partially separated their parliamentary representation from the Labour Party and have four independent seats in the House.

The annual forum at Waitangi's Te Tii marae this weekend will hear a hint of the immense possibilities those seats present. The only thing the rest of us have to argue about is what we should do in response.

We could do what Brash suggests. We could abolish the Maori seats in Parliament, cancel all "race-based" health, education and welfare programmes, give tribes no more recognition than anybody else when developments are proposed in their traditional territory.

We could do all that, and worse, and Maori would probably endure it.

But Brash is not a tyrant and we are not a tyrannical majority. Sooner or later Maori will carve out a powerful place for themselves in New Zealand's politics and make this state express their national will and character as well as mine.

It may start to happen this year if the Maori Party sets about building a broad constituency.

The most the majority of us can do is thank goodness for the Treaty. It was a pact between distinct and powerful people to form a proud state for both, and we hear its echo wherever we are on Waitangi Day.

It was a great idea and it is going to be great when our descendants get there.

Fran O'Sullivan: Why Brash is in need of strong women at his side

What Don Brash needs is a dominant woman in his life. The Kiwi women Brash needs to get onside if he is ever to become Prime Minister are not the sort to be seduced by his paternalistic repetitions of "my wife is from Singapore".

I'm not suggesting he trades in his publicly adoring wife, Je Lan, for a hard-bitten New Zealand woman.

But if he is to connect with the majority of female voters who rejected him at the election, he needs at least one woman in his inner circle who is not afraid to wear the cojones.

And New Zealand women need to know he will not sack her - as he did Georgina te Heu Heu and Katherine Rich - when she rams home where the political bottom-line is for female voters.

A "Boagan" - as we shall dub this fearless taskmistress - would not have allowed Brash to prostitute himself in front of the bunch of stuffy Rotarians who determinedly rained on his parade at his so-called Orewa IV address on Tuesday.

The speech - on paper - hit many of the right buttons.

It correctly identified the economy as the issue du jour, identified health and aged care as major concerns for women, and it (mercifully) soft-pedalled the boring personal responsibility mantra that gets up the nose of those women who both run and fund the families they've had with feckless New Zealand men and in any event far prefer Prime Minister Helen Clark's more down-to-earth approach.

It went some way (but not far enough) to presenting Brash as a PM-in-waiting.

But in truth, Orewa IV was a dreadful affair. Brash was monstered by a Rotary Club so full of its own self-importance that it would not allow the timing of his speech to be orchestrated so he could "go live" after its delivery on the 7pm current affairs shows.

The laidback audience (no uppity females to ask questions, please) was close to comatose in the sultry Auckland weather. The questions were banal.

The Boagan would have decided months ago that Orewa had long ago passed its usefulness as a reference point.

Brash knew what he was doing when he chose to make his first "state of the nation" speech on Sir Robert Muldoon's old stamping patch months before he rolled Bill English as National leader. It was a symbolic demonstration he wanted the top job.

But Sir Robert's crowd - those he kicked about with during his annual sojourns at Hatfields Beach in the 1970s and 80s - are not those Brash needs to be seen to impress.

He needs to move on and connect with urban Aucklanders: city professionals, money women, Parnell jocks, stroppy Asian women - like those who were not afraid to confront Chinese President Hu Jintao over their student conditions here; fun-lovers; lawyers; and Ponsonby poseurs.

Reality check here. This country has been under female rule since 1996 and, unfortunately for The Don, most women would rather keep voting for Helen Clark than the man who wants her britches.

Can you imagine that Labour organisers would allow any possible leadership pretender like Phil Goff or Steve Maharey to make a staged late entrance at a Clark state-of-the nation - like National leadership aspirant John Key performed at Orewa IV? Fat chance.

The Boagan would have made damn sure that any contenders for Brash's job would have got short shrift. There would have been a cellphone call to say, "John, if you can't get here on time, either go through the side entrance or don't come!"

The Boagan would then have ordered the organisers to lock the doors to ram home her point.

The Boagan would also by now have stiffened Brash's spine to go for New Zealand First leader Winston Peters and challenge him to release the emails he claims to have in his possession that would end the National leader's political career.

Brash would have told Peters to "put up or shut up".

The Boagan would have sicked the police on to Peters for holding stolen property.

Clark doesn't need a Boagan because she is not afraid to do her own dirty work. Her male minders are there to soften her edges.

Clark also looks after her female MPs. Seven now hold roles in her ministry, ranging from the incomparable Annette King - whose early parliamentary blooding as a late-night cardsharp enabled her to escape the health portfolio without suffering terminal damage - to Ruth Dyson and Lianne Dalziel, both rehabilitated after minor misdemeanours, her long-time mate Judith Tizard and some more recent additions.

But women remember what happened to te Heu Heu and Rich, who were sacked for defending their portfolios from political abuse, not any personal transgression.

Of the 12 women in National's caucus, only the feisty Judith Collins - resplendent in her yellow jacket - is on the front bench.

Rich still languishes one row back, ranked well behind male politicians who have yet to demonstrate her level of effectiveness.

These are the images Brash needs to change fast.

Former National Party fixer Michelle Boag put him there. He needs her back now.

Graham Reid: A pint and a few preconceptions

The Moon and Sixpence in Wardour St is much like many pubs in London these days. Whatever genuine historical features it might have once had have been air-brushed out in a sanitising make-over.

The artists, poets and musicians whose portraits are framed on the walls may, or may not, have some connection with the area, and the pub menu is almost identical to that of most others. The Moon and Sixpence is a place with the semblance of a past but little sense of presence.

You have to look long and hard for a genuine, dusty and character-filled London pub these days.

At first sight this one looked like an interesting place so that was where my son and I ended up for lunch: steak sandwiches with chips prepared by an Italian guy, and beers served by two young Scandinavians exuding an unnatural aura of health in a place where smoking seemed obligatory.

Cymon and I sat with our beers and, over the noise of a pokie machine and traffic from the street outside, swapped London stories.

He has been living there for almost a year and I had first seen the city at 18. Yet despite the chasm of decades we came to similar conclusions about the place, notably that little in London - like the pub, named for the Somerset Maugham novel - is as it first seems.

As we chatted this opinion was reinforced by two other patrons: one a well-groomed gentleman in what looked like a Burberry coat, the other a bent and dishevelled old man who chain-smoked over his plate of fried fish and drank glass after glass of Strongbow cider.

As the afternoon progressed I noticed the gentleman in the Burberry was pacing the room muttering to himself, pulling his lips back over his teeth and occasionally shaking his head violently.

Initially I had taken him for a barrister on a lunch break or Someone In The City but increasingly it was clear that he was a nutter, albeit a very well-dressed one.

And the old man who appeared to have pulled himself out from under a bridge?

In the late afternoon he pulled one of those expensive personal computers-cum-phones from his pocket, appeared to check his emails, tapped out a few messages, was met by a dapper gent in a three-piece suit who was definitely Someone In The City, and then they took their leave.

We did too - bemused again by London's consistent ability to confound expectation and upset preconceptions.

As Somerset Maugham observed, "It's asking a great deal that things should appeal to your reason as well as your sense of the aesthetic."

Richard Inder: Pared-down report shows new man's influence

Carter Holt Harvey is already a changed company. Its annual earnings, the first under the control of billionaire Graeme Hart, was marked by its brevity.

In the past, journalists and analysts would traipse out to CHH's well-forested campus in Manukau. There we would sit for most of the morning, digesting comprehensive disclosure statements and listening to thorough PowerPoint presentations from the divisional heads. This year, it was a phone conference presented by an outgoing chief executive and much less detailed disclosure statements.

Meanwhile, these earnings show that the company has incurred $35 million of costs linked to redundancies at its Australian packaging business, its wood products business group and at its head office. But the market has been given no indication of the strategy behind the reorganisation, nor even the actions taken.

During the phone conference, Citigroup head of research Mark Benseman recorded his frustration.

"I think it is pretty disappointing there have been people leaving the firm and there has been no announcements to the stock exchange about what has been going on," Benseman said.

He was referring to the departure of executives such as chief operating officer Ian Unwin, commercial director Maree Webster and CHH panels chief executive Ian Myers.

These are not insignificant roles. Their passing on in such rapid succession without comment would be inconceivable under CHH's former owner, International Paper.

Sure Hart controls almost 86 per cent of the company and can largely do whatever he likes, but the detail formerly provided by CHH was exemplary.

Fortunately, minority holders will not be disadvantaged as the impending appraisal report on his latest offer should disclose much that is now lacking.

The point is that change is under way, and this is relevant to the outcome of Hart's latest bid. Prior management's strategy played a much more important role when adviser Grant Samuel assessed Hart's bid last year. This time, Hart's strategy will play a much bigger role.

Hart has a lot going for him. It is only four months since Grant Samuel ran its eye over the books so not a great deal would have changed; certainly the market has not improved greatly.

The structure of the bid, promising a bonus to shareholders if Hart reaches the critical 90 per cent threshold where he can move to compulsory acquisition, provides a strong incentive for investors to get in quick.

The $2.75 offer does not look bad when compared with the $2.50 of the prior bid. Retail investors at least, which are now a minority on the share register, will be feeling pretty smug about their gamble.

Against this is the fact that hedge funds - those weird animals that take a gamble on special situations - represent less than 1 per cent of the share register. They are more likely to accept as a 10 per cent gain in four months looks okay, but they only represent a small block.

Meanwhile, history is against Hart. Many of those who have bought in to CHH would have seen him make huge sums through investments such as Burns Philp, Goodman Fielder and New Zealand Dairy Foods.

They have also witnessed and enjoyed gains made by minority investors in Tranz Rail, now called Toll NZ. Australia's Toll bid just over $1.10 but failed, and the shares are now trading at $3.10. Toll, like CHH, was taken over by an investor determined to get gains.

They are there for the long term. This bid may have some way to run.

Brian Gaynor: Australian adventure hobbles Telecom

Telecom's interim result is usually the first major NZX announcement of the year, and this year was no exception. Thursday's results presentation gave investors one of the first opportunities to assess how the economy, the country's largest listed company and the benchmark NZX-50 gross index will perform in 2006.

Telecom is tremendously important to the sharemarket. It represents 20 per cent of the market's value, 24 per cent of the benchmark NZX-50 gross index and, on most days, more than 40 per cent of the value of all shares traded on the NZX. No other company dominates a stock exchange as Telecom does the NZX.

The Wellington group also has a huge impact on the NZX's performance because of its high index weighting.

In January, the NZX ranked bottom of the 50 sharemarkets included in the MSCI indices with a negative return of 2.6 per cent. The only other sharemarket with a negative return was Denmark, which was down 0.4 per cent.

The NZX's poor start to the year was mainly due to a 5.8 per cent decline in Telecom's share price in January.

When chief executive Theresa Gattung, chief financial officer Marko Bogoievski and chief operating officer Simon Moutter fronted up to analysts in Auckland on Thursday morning, they were in an upbeat mood. (Fronting up has a different meaning these days as no more than four or five analysts were present but another 50 from New Zealand, Australia and Asia were on the teleconferencing facility.)

Gattung's first good news was the economy. She said that Telecom was seeing no signs of an economic downturn, staff recruitment remained a problem and the company added 135,000 mobile customers in the December quarter while Vodafone had 68,000 net additions.

How could the economy be softening if the country's two mobile operators added 203,000 customers in the latest quarter?

Gattung glossed over the full interim result, which was a loss of $466 million, including an $897 million writedown of its Australian assets.

The announcement of the Australian write-off on January 20 allowed Gattung and her executive team to focus on the positive issues because the group's transtasman problems would have completely dominated this week's presentation if they hadn't been disclosed two weeks earlier.

Moutter, who runs the New Zealand operations, opened his presentation with the declaration that he was "feeling upbeat". That is an extremely rare comment from a Telecom senior executive.

He said the mobile division was doing well and the group was "back in the game". He was particularly pleased with broadband growth and the group had added 38,000 connections in the December quarter, including 35,000 residential connections.

Bogoievski drew the short straw and had to describe Telecom's dreadful performance in Australia. The company has written off nearly $2 billion across the Tasman. The remaining book value of these operations is A$628 million ($686 million).

The CFO said that there was more downside than upside to the revised Australian 2006 year ebitda forecast of A$85 million to A$95 million and a strategic review of these operations would begin next week. No decision had been made on whether to retain or sell the Australian operations.

After Gattung, there was time for questions from seven analysts.

The presentation ended quickly, the analysts left, eight media representatives took their place and Gattung, Moutter and Bogoievski repeated the same positive addresses.

Analysts ask questions about costs and capital expenditure whereas journalists are more interested in product and sales issues. Most of the questions were directed at, and answered by, Moutter and Bogoievski at the analysts' presentation whereas Gattung replied to the media.

Gattung concluded that the company was comfortable with the June 2006 year adjusted net profit after tax forecasts, excluding the Australian write-off of $830 million.

She seemed visibly relieved there were no questions from hard-nosed and persistent Australian journalists.

The upbeat presentations had a positive impact on the sharemarket, with Telecom's price rising 16c to $5.82 and the NZX-50 gross index leaping 1.3 per cent while the ASX fell 1 per cent. Just over $61 million of the group's shares were traded, representing 64 per cent of total NZX turnover.

Thursday was a clear example of the importance of Telecom to the NZX.

Although Telecom's interim result was better than expected, the group faces major medium and long-term challenges.

It operates in a dynamic industry where most companies are trying to maintain the profitability of their major traditional services (fixed-line rentals and national and international toll calling) while desperately trying to convince customers to use their new services.

Fixed-line rentals and toll calls now represent 43 per cent of Telecom's revenue, compared with 60 per cent in 1997, but the group's Australian acquisition has been a major setback to its new services development.

A former Telecom director said Rod Deane was determined to make an acquisition in Australia but the board, which was dominated by representatives of the two major US shareholders at the time, wanted him to focus on New Zealand. When Deane moved from chief executive to chairman in 1999, after the US shareholders had sold out and their board representatives had resigned, Telecom launched a bid for AAPT.

Meanwhile in New Zealand, Vodafone acquired Bell South in November 1998 when the latter had only 20 per cent of the domestic mobile market, with Telecom holding the remaining 80 per cent.

With Telecom focusing on Australia, Vodafone raised its share of the domestic mobile market from 25.5 per cent in June 1999 to 43.3 per cent in June 2001 and subsequently went above 55 per cent.

A former Vodafone chief executive said Telecom was a soft competitor in those early years.

Moutter is correct to say that Telecom is "back in the game" as far as mobile is concerned, but aggressive pricing has played a big role in this. The group has 1.81 million New Zealand mobile customers, a rise of 23.6 per cent in the past 12 months, but mobile revenue increased only 10.8 per cent over the same period.

The money lost in Australia could have been used to upgrade the domestic network, which is now extremely slow and expensive for many broadband users. There may be a significant switch to Telstra Clear when the Australian-owned telco offers broadband services in the next month or so, particularly if its rates are attractive.

Telecom also faces threats from VOIP (phone calls over the internet) and the prospect of a significant number of fixed line cancellations. Can the group expect another 12 months where it has 345,000 new mobile connections and a net loss of only 1000 fixed residential lines and 1000 fixed business lines?

Telecom's interim result was encouraging, but it still has a long way to go before it gets over the Australian debacle. It will also have to run hard to switch customers to its new services and maintain the profitability of these divisions.

When asked about this on Thursday, Gattung broke into a broad smile, shuffled her feet and declared that Telecom has to run exceptionally fast just to stand still.

It is vitally important, as far as the NZX is concerned, that the chief executive and her executive team are up to the challenge.

Disclosure of interest: Brian Gaynor is a Telecom shareholder and an investment strategist and analyst at Milford Asset Management, whose clients hold Telecom shares.

Paul McIntyre: PM fights moves to drag Canberra into wheat scandal

Who would want to be an Australian wheat farmer? Yes, there's the tantalising prospect of driving a John Deere tractor bigger than Saddam Hussein's old palace bedroom, but then you've got to deal with the fallout of flicking the former Iraqi dictator secret kickbacks for buying your crop.

Allegations have been flying thick and fast for the past three weeks in Australia as Commissioner Terence Cole, QC, presides over an inquiry into the nature of secret payments made to Hussein's regime by the former statutory authority, the Australian Wheat Board - a public company since 1999 owned primarily by Australian wheat growers.

For a couple of weeks the inference and angling at the Cole inquiry has been that the AWB paid Iraqi officials up to A$300 million in kickbacks during the United Nations-controlled oil-for-food program after the first Gulf War via a Jordanian trucking company partly owned by the Iraqi regime.

Indeed, the Cole inquiry follows a UN report last October which accused the AWB of funnelling about $A290 million to Hussein's regime through the UN's oil-for-food program and allegations in 2003 from the US that funds from Australian wheat contracts were being redirected back to Iraq (the then Australian ambassador to the US successfully blocked attempts for a US congressional inquiry, claiming the allegations were part of a "smear campaign" by US commercial interests).

Until this week there was not a lot to pin on senior AWB executives or government officials about the scandal. Certainly, there were a few small firecrackers going off but no smoking gun.

Then along comes Mark Emons, AWB's former head of the Middle East desk in 1999 who triggered all kinds of headlines after signalling that the AWB's then chairman, Trevor Flugge, managing director Murray Rogers and chief financial officer Paul Ingleby, were aware of the dodgy arrangements.

Emons told the inquiry he had discussed the payment with Flugge of an imposed US$12-per-tonne trucking fee that could have been a kickback. "This fee was set by the Iraqi Grains Board," he said. "There was no doubt in my mind that somehow or other it [the trucking fee] was going to end up with an Iraqi." Despite his concerns, Emons said Flugge told him: "As long as it is not costing AWB any money, you have to find a method of paying it."

The AWB has admitted to the Australian Government inquiry that it inflated wheat prices to cover extra payments - called trucking and service fees - but said the Iraqi grain board told AWB the payments were UN-approved

The inquiry also heard this week of an email sent from an AWB executive to Zena Armstrong of the Australian Department of Foreign Affairs and Trade's Iraq taskforce on June 10, 2003. The email contained a memorandum from the Iraq provisional government to all ministry advisers saying oil-for-food contracts had been artificially inflated by 10 per cent as a mechanism of diverting funds to the Hussein regime. The instructions in the email were to review such contracts with a view to reducing their total value by 10 per cent and allow others that had already been approved by the UN to be refunded from a UN escrow account.

"We need to know what percentage kickback or after-sales service was involved under the extra fees category," the email said.

Opposition foreign affairs spokesman Kevin Rudd said on Thursday the memorandum was proof of a cover-up by the Howard Government. "John Howard's attempted cover up of this A$300 million wheat-for-weapons scandal collapsed in a heap today," he said.

"How could Howard in October 2004 have instructed our ambassador in Washington to go and block a US congressional investigation into the AWB when more than a year before it had received clear information of massive kickbacks from wheat sales in Iraq going straight to the Hussein regime?"

Opposition Leader Kim Beasley said Labor would hold a Royal Commission into the affair if it won office.

Despite all the huff and puff, however, Prime Minister Howard was yesterday boldly challenging those trying to draw the Government into the scandal, and particularly the 2003 email sent to DFAT from the AWB's global head of sales and marketing, Michael Long.

"I did not know, my ministers did not know and on the information that I have been provided and the advice I have received from the Department of Foreign Affairs and Trade I do not believe that the department knew that AWB was involved in the payment of bribes," Howard said yesterday.

Although there were expectations the Cole inquiry would seek to expand its terms of reference to include Government officials, Howard said it was unlikely based on conversations he had in the past two days with Commissoner Cole. Rather, it was likely the terms of reference would expand to investigate BHP Billiton's activities in Iraq in the same period.

So, the only conclusion one can make at this stage of the inquiry is that earning a buck from wheat has little to do with driving dirty big tractors.

* Paul McIntyre is a Sydney journalist

Paul Thomas: Conservatives speak but say very little

The conservatives had their say this week but how many people were listening?

Don Brash's speech to the Orewa Rotarians needn't detain us. The economy is on the brink of turning to custard, he said, and it's all the Government's fault.

That's what leaders of the opposition do; it's their job.

The other thing they do is try to avoid getting stabbed in the back by their loyal lieutenants. This is a little trickier and few manage to pull it off.

The declaration that you intend to lead your party into the next election hasn't worked thus far and there's no reason to believe the laws of politics (and the jungle) will be suspended solely for Dr Brash's benefit.

In Washington President Bush gave his State of the Union address. There are various rituals associated with this occasion. For instance, when the President makes his entrance, members of Congress invariably carry on like tipsy grandmothers at a Neil Diamond concert.

The bipartisan goodwill lasts for as long as it takes the President to say something political, at which point one side of the chamber springs to its feet in frenzied applause while the other remains grimly grounded.

Bush devoted most of his speech to telling us that Iraq and the United States economy are in tip-top shape, which must have come as a surprise to many, not least the 65 per cent of the American public who think both are in a shambles.

He laid out the big-picture strategic case for being in Iraq, the one they dusted off when they couldn't find any weapons of mass destruction. In a nutshell, this is that Middle Easterners are angry and turning to terrorism because they don't have the vote.

It works like this: a democratic Iraq will become a shining example for the rest of the region. Dictatorships will collapse, the people will be set free, terrorism will be renounced and America and the world will be safer places because the Bush Administration had the courage to act, and the steadfastness to ignore the defeatists and see the mission through.

It's a seductive theory and it's certainly true that the status quo ante didn't have much to recommend it, characterised as it was by assassination, displacement, terrorism, war, genocide and perpetual crisis.

However, the cynical, or perhaps realistic, counter-argument would be that it requires optimism on an irrational scale to believe everything will fall into its allotted place.

It's a little like thinking you can kick over a house of cards and they'll fall into a neat stack, arranged by suit and in descending order.

Take the central component, democracy. In their recent election the Palestinians voted resoundingly for Hamas, an outfit that makes no bones about its use of terror. Bush's response was to insist that Hamas must disarm, recognise Israel and commit to a lasting peace.

The problem is that's not what Hamas stands for, and if Palestinians had wanted that policy package they presumably would have voted for Fatah.

The Palestinians, of course, are newcomers to democracy and probably assume that what a political party says during an election campaign is some sort of guide to what it will do if it gains office.

Being more experienced and therefore sophisticated in these matters, New Zealanders don't pay attention to anything but the bribes.

Dictators have always justified their tyranny by claiming that the people can't be trusted with democracy. Indeed: they might vote for the other mob.

After the Islamic Salvation Front gained a majority of seats in the 1992 Algerian election, the military seized power, supposedly to save the country from fundamentalism, setting off a spiral of terror and counter-terror that resulted in 100,000 deaths. For the most part the West looked the other way.

As American Presidents tend to do, Bush portrayed America's role in the world and its use of force in unashamedly idealistic terms. Much of the world sees it very differently, and this suspicion will hardly be alleviated by a doctrine which equates democracy with outcomes that suit American interests.

The most dubious assumption of all is that America has the will to stay the course in Iraq. The insurgents certainly don't believe that. They think they just have to keep killing US soldiers and their public opinion and election cycle will do the rest. History and the polls are on their side.

Bush didn't directly mention the deficit, the 800kg gorilla he's pretending not to notice but which scares the hell out of many economists.

Back in the rip-roaring 1980s Ronald Reagan said: "I don't worry about the deficit - it's big enough to look after itself." That, apparently, is still what passes for economic policy in Washington.

The third and most intriguing conservative utterance of the week came from Italian Prime Minister Silvio Berlusconi, who promised to give up sex until the April 9 election.

Coming from a 69-year-old, this might seem a rather empty promise.

Coming from a 69-year-old multi-millionaire who's had a facelift and a hair transplant, it could well amount to a major sacrifice and a valuable example of the self-denial we'll all need to practise if Brash is right and Bush is wrong.