The Australian government would not break-up telecom giant Telstra in retribution for what it has termed an unprecedented political campaign ahead of a national election, an AFP report said.
The AFP report quoted Australia's Communications Minister Helen Coonan as saying that Telstra could be 'punished' for its actions, raising the prospect the government may force Telstra to split its retail and infrastructure divisions.
But Coonan backed down, saying Canberra's policy towards Telstra, in which the government owns a minority stake, had not changed, the AFP report said.
'There will not be unilateral structural separation of Telstra,' Coonan, quoted by the report, said. 'There is no change in government policy.'
The relationship between the government and Telstra has soured after the administration backed a regional broadband network by a rival consortium and said it would open up bidding for a national network, the AFP report said.
It deteriorated further when Telstra last week sent letters to its 1.6 million shareholders criticizing the government ahead of an election expected to be held late November.
Coonan has labeled Telstra management 'reprehensible' and 'pig-headed' since the letter was sent, accusing it of 'engaging in King Kong antics' with a political campaign unprecedented in Australian corporate history, the report further said.
Telstra welcomed the fact that she had appeared to back down on the possibility of splitting the company, the report said.