Stock in the company dropped 14 cents, or 4.3 per cent, to $3.11, in early trade.

This morning Telecommunications Minister Stephen Conroy said the reforms, including new performance benchmarks, would be aimed at carving up the company with the goal of generating more competition and consumer benefits.

''It's going to impact the share price pretty heavily,'' said Wise Owl.com's equity analyst Joshua Terlich, speaking before the company's shares began to trade at 10.38am.

However, the news had ''been flagged for a while,'' he said.

Today's announcement was just confirmation of the Government's position, Mr Terlich said. But it is ''always a cause for negative sentiment in the short term.''

''It's long overdue,'' said Gordon Renouf director of policy and campaign at consumer group CHOICE.

''In the short term Telstra shareholders won't be particularly happy but what we won't see is that it is in fact good for all other businesses and their shareholders should be happy.''

The Australian Communications Consumer Action Network hailed the announcement.

''The structural separation implicit in the Governments' proposals plus improvements to the consumer protection regime may at last provide for vigorous competition in fair and informed markets,'' ACCAN chief and ex-Australian Competition and Consumer Commission member Allan Asher said.

That was the intention of the 1997 legislation but consumers did not benefit as the reforms were half-hearted and regulators were ill-equipped for the task,'' he said.

End of an empire

Nonetheless, the Government's announcement doesn't spell the end of the company, just the end of an empire, said Mr Terlich.

Mr Terlich likens the separation of Telstra with the regulatory break up of the Australia Securities Exchange, which the Government unveiled weeks ago.

In the business of sharetrading and listings ''the Government wants the marketplace to be more competitive, but the ASX will likely remain a dominant player,'' even after the oversight duties are handed to the Australian Securities and Investments Commissions.

Telstra has a foothold in nearly every part of the telecommunications market, he said.

''It will still be very strong going forward,'' Mr Terlich said. ''But not the empire we've known it to be over the last 20 years.''