Sale Will Proceed, A$8B On Offer
Dow Jones Newswires
The Wall Street Journal
Friday, August 25, 2006
CANBERRA (Dow Jones) -- Australian Prime Minister John
Howard confirmed Friday the government will proceed with the
planned sale of its remaining stake in Telstra Corp. (TLS),
offering A$8 billion worth of shares to investors.
Howard said the remainder of the government's 51.8% stake in
Telstra, about A$14.5 billion worth of stock, will be
transferred to the Future Fund, to be sold down over time.
"We are proceeding with this sale because we believe that we
can achieve an appropriate return for taxpayers at this
time," Howard said in a statement.
"Our sale advisers have been closely assessing market
conditions and their unanimous advice to the government is
that there is sufficient demand to support an offer of this
magnitude and it can be done at a fair price."
Howard said the shares will be sold in October and November,
with the final sale structure to be finalized prior to the
launch. The offer, to Australian and overseas retail and
institutional investors, will include two installment
receipts over 18 months.
The shares offered by the government will include the
Telstra full-year dividend of 28 cents, Howard said.
Legislation allowing the government to sell its remaining
6.44 billion Telstra shares was passed by parliament
September 2005 and cabinet was originally scheduled to give
the sale a final go-ahead in the first quarter of this year.
But the decision was repeatedly postponed as Telstra's share
price plummeted amid repeated clashes with the government
and the regulator.
Telstra shares have slumped more than 30% since Chief
Executive Solomon Trujillo, a former Chief of U.S. West,
took over in July 2005, and are trading at less than half
the A$7.40 a share Canberra sold its last tranche of shares
at in 1999.
The share price plunge followed loud and frequent warnings
from the company's management about the "value destroying"
regulations imposed by the Australian Competition and
Consumer Commission, which Telstra says could wipe hundreds
of millions of dollars off revenues over coming years.
The government was believed to have sought an undertaking
from Telstra's board that anti-regulator sniping would cease
during any sale process.
Despite the government's request, Telstra's public policy
chief Phil Burgess continued complaining about the
regulatory regime until as late as Thursday.
Howard said Telstra Chairman Donald McGauchie had confirmed
Burgess' latest anti-regulator comments didn't represent
"Telstra's Chairman, board and senior management have
assured the government of their strong commitment to this
sale and their ongoing cooperation," Howard said.
"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."
The government had reserved the right to transfer some or
all of its Telstra stake to its Future Fund, set up to meet
future public service pension liabilities.
The opposition is against the Future Fund transfer
proposition, saying it will create an ongoing overhang that
will depress the share price.
The Australian government is being advised by UBS, Goldman
Sachs JBWere, ABN AMRO Rothschild and Caliburn Partnership
on the best way to offload its remaining Telstra shares.
"As with all public offers, a final decision to launch the
offer remains subject to market conditions being conducive
for a sale which achieves the government's sale objectives,"
Canberra began privatizing Telstra in 1997, when it sold
one-third of its shares at A$3.30 each to retail investors
and A$3.40 to institutional investors. The first tranche of
Telstra raised A$14 billion for the government.
A second tranche of Telstra shares, representing another
16.6% of the company, were sold in 1999 at A$7.40 to retail
investors and A$7.80 to institutions to raise about A$16
The government has taken its promise to fully privatize
Telstra to three elections but wasn't able to get
parliamentary authority for the full sale until gaining
control of the Senate last July.
Telstra shares closed flat at A$3.50 Friday after hitting a
nine-year low of A$3.43 Tuesday.
"Selling Telstra continues to be good policy that is in the
interests of existing Telstra shareholders, in the interests
of the company and in the interests of the broader
community," Howard said.
Telstra, Australia's largest telecommunications company, is
fighting for local market share with global rivals such as
Singapore Telecommunications Ltd. (T48.SG) and Vodafone PLC.
- By Barbara Adam, Dow
Jones Newswires; 61-2-6208-0901; firstname.lastname@example.org
-Edited by Graham Morgan