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Howard In Surprise Telstra Decision |
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Written by Adam Gosling
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Saturday, 26 August 2006 |
The Australian Federal Government has decided to hedge its
bets on the proposed sale of its remaining stake in incumbent telco Telstra
Corporate and will sell of an estimated A$8 billion in shares to retail and
institutional investors before placing the remaining stock into the Future Fund
for a later sale.
The Future Fund is an investment vehicle owned by the
Government to help it pay for the future generous superannuation requirements of
politicians and public servants (officially: "to address the challenges we face
from an ageing population).
It seems likely the decision will go some way toward easing
tensions between the liberal Government, competition regulators and the provocative
senior management of the massive telecommunications monolith.
The Government's decision to go ahead with the share sale in
October and November this year comes in the face of a plummeting share price
talked down by Telstra management in what appears to be an attempt to put
pressure on the Government to ease competition regulations to get a better
price for its remaining shares.
The part sell-off, known as T3 because it is the third
tranche of shares sold by the government, will ease the "conflict of interest"
the Howard Government created itself when it decided on the part sell-off that
was T1.
Whether putting the remaining shares in the Future Fund will
be enough to ease this tension remains to be seen.
"The Government has gone to the past four elections
promising to sell its Telstra shares. For too long, the government has had a
massive conflict of interest, as the owner and seller of Australia's
largest telco; and as the industry regulator," said Prime Minister Howard in a
statement announcing the proposed sale.
In an apparent attempt to make the share offer attractive to
retail investors, payment for their shares will be required in two instalments
over 18 months but they will be entitled to the full dividend that Telstra
intends to declare at 28 cents for the next year.
"Telstra's Chairman, Board and senior management have
assured the government of their strong commitment to this sale and their
ongoing cooperation. In particular, Telstra has made it clear that they will
not use the sale process as a vehicle to campaign for changes to the regulatory
regime," said the Howard statement.
The proceeds of the sale will be placed in the Future Fund
along with the unsold shares, although the unsold portion will be available for
sale after a two year period.
In respsone to the Prime Minister's announcement Telstra
released a statement in which Chairman, Donald McGauchie AO, welcomed the
Federal Government's decision to proceed with T3.
"Telstra's board and management have always been
supportive of the sale of the government's remaining stake in Telstra, and we
are very pleased that this will now occur," he said.
Telstra believes that the T3 sale is in the best interests
of Telstra's shareholders, customers and employees and will work with the
Government during the sales process to help ensure its success.
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