to Appeal Australian Regulator's Fixed-Line Fee Decision
Going on the Attack Again Contradicts Pledge to Ease
Criticisms Ahead of Sale
By Lyndal McFarland
The Wall Street Journal
Tuesday, August 29, 2006
SYDNEY, Australia --
Telstra Corp. has attacked a recent decision by
Australia's competition regulator, saying it "defied logic,"
just three days after assuring the government that it would
tone down its criticism ahead of a share sale of eight
billion Australian dollars (US$6.06 billion).
Telstra said it will appeal the Australian Competition and
Consumer Commission's decision to reject the price the
company planned to charge rivals, such as
Singapore Telecommunications Ltd., to gain access to
"The [commission's] decision is inconsistent with the
government's policy of a national uniform retail price and
destroys value for Telstra shareholders," said Telstra Chief
Executive Solomon Trujillo.
"We will appeal this decision to the Australian Competition
Tribunal as a matter of urgency," Mr. Trujillo said in a
statement, which included commentary on the company's legal
position from Telstra's public-policy chief, Phil Burgess.
Telstra had earlier assured Canberra that Mr. Burgess
wouldn't be offering opinions on "all matters that impact
the sale process."
After months of delays, Prime Minister John Howard said
Friday that in October and November, the government would
sell A$8 billion in shares, or about a third of the
government's remaining 51.8% stake. His announcement came
after he secured a promise from Telstra that it wouldn't
attack the regulator and campaign for policy changes during
Canberra's remaining A$14.5 billion stake will be locked
away for two years in a fund set up to meet public-service
Analysts said Canberra will have to offer Telstra shares at
a significant discount to generate sufficient demand. The
shares have fallen more than 30% since Mr. Trujillo joined
the company a year ago, and analysts expect a further
decline ahead of the share offering.
In Sydney trading yesterday, Telstra shares closed unchanged
at A$3.50 each after touching a record low of A$3.43.
Investors are likely to be cautious about the offering, as
Telstra faces falling fixed-line revenue, intense
competition in the mobile and broadband sectors and a tough
regulatory environment, analysts said.
"Amongst all the hype of an A$8 billion public offer ... it
is important to remember that the fundamentals of Telstra
will remain unchanged," Macquarie Research analysts said in
Citigroup analyst Tim Smeallie said he expects domestic
institutional demand for Telstra shares at "between A$2.80
and A$3." At those levels, Telstra will be in line with its
European peers, and that may help to increase interest in
the stock from large institutions, Mr. Smeallie said.
Lyndal McFarland at