* Sixty one pct of shareholders reject its remuneration report
* Two consecutive protest votes means board at risk of ouster
* Chairman warns Telstra’s world “changed” after NBN (Recasts with vote on executive pay)
By Paulina Duran
SYDNEY, Oct 16 (Reuters) - A majority of Telstra Corporation’s shareholders voted on Tuesday against its executive pay proposal, raising the possibility the board of Australia’s largest telecom firm could be ousted next year if the protest vote is repeated.
Telstra said 61 percent of its shareholders cast a “No” vote at its annual meeting to reject its remuneration report, capping a tumultuous year in which the company slashed dividends and its shares hovered near all-time lows.
Once a local shareholder darling, Telstra has struggled for growth as competition and technology hammer its mainstay businesses, pounding its share price and pushing it to its weakest annual profit in six years. The company slashed its final dividend by about a third in August, the first such drop since it listed in 1997.
The rejection of the remuneration report by shareholders was widely expected. Pre-empting the protest vote, the company wrote to shareholders last week to apologise for the lack of transparency in executive pay. It has cut executives’ bonuses by a nearly a third.
Under Australian corporate rules, if more than a quarter of shareholders vote against the pay proposal for two years running, they can call for the board to be removed.
Two large proxy advisory firms - CGI Glass Lewis and Institutional Shareholder Services - had recommended shareholders oppose the remuneration report.
“We will listen, we will consult yet again, and we will do everything we can to amend and enhance our remuneration policies where it is demonstrated that we can do better,” Telstra’s Chairman John Mullen told investors at the meeting.
But he said the board would not change direction or remove bonuses for executives completely just because of criticism from proxy advisers and shareholders.
Telstra still dominates Australia’s mobile telephone and broadband markets, but its business has been upended by the government-owned National Broadband Network (NBN), one of the biggest infrastructure projects in Australian history.
The network replaces copper wires laid by the firm across the continent with a fibre-optic system that the telco must now pay to access.
Mullen said that by 2021, the NBN would have taken away almost half its net profits.
“I would love to be able to stand before you and say that all this change is just a temporary blip and we will soon be back to the old stable world of legacy profits and an ever increasing dividend, but I cannot,” Mullen said.
“Telstra’s world has changed and it is going to keep on changing.”
The bleak situation has prompted the Melbourne-based company to cut a quarter of its workforce and separate its fixed-line assets, which it values at A$11 billion ($7.84 billion), from the rest of the firm in preparation for a potential demerger or partnership.
Last month, Telstra cut its 2019 earnings guidance to between A$8.7 billion and A$9.4 billion, from a previous range of A$8.8 billion to A$9.5 billion, and said dividends would fall.
Telstra shares ended down 1.0 percent on Tuesday in a broader market that edged up 0.6 percent. ($1 = 1.4013 Australian dollars) (Reporting by Paulina Duran in Sydney and Aditya Soni in Bengaluru; Editing by Stephen Coates and Muralikumar Anantharaman)