Govt to sell AU$8 billion in Telstra shares
The federal government will sell part of its 51.8 percent stake in Telstra to the public in October and November, Prime Minister John Howard said today.
Howard said the government would offer AU$8 billion in stock to retail and institutional investors in Australia and overseas.
"The government's remaining Telstra shares will be transferred to the Future Fund for the fund to sell down over time," Howard said in a statement.
Howard said the government had 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," he said.
"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."
The Prime Minister said the government believed it could achieve an appropriate return on taxpayers' money with a sale at this time. "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," said Howard.
The structure of the massive sale would be finalised before the offer launch. "Retail investors will be able to pay for their shares in two instalments over 18 months but will be entitled to the full dividend that Telstra intends to declare at 28 cents for the next year," said Howard.
However the Prime Minister noted a final decision to launch the offer remained subject to "market conditions being conducive for a sale which achieves the government's sale objectives".
Regulatory regime "settled"
Howard also sent a strong message to the telecommunications industry on the issue of government regulation.
"We believe the regulatory framework is now settled and we expect all companies to plan and operate within the rules that have been set," he said.
"The cornerstone safeguards of the Universal Service Obligation, the Customer Service Guarantee, price controls and other important consumer protections, will continue to apply to Telstra and all carriers because they are all provided in regulation and not subject to review until 2009."
Pointing out the government did not have to own Telstra in order to regulate the telco, Howard said the government remained committed to regulating the industry "in the interests of protecting consumers".
The Telstra reaction
Telstra welcomed the move in a statement sent to the Australian Stock Exchange this afternoon.
"Telstra's board and management have always been supportive of the sale of the government's remaining stake in Telstra and we are pleased that this will now occur," said Telstra chairman Donald McGauchie.
Earlier, Howard revealed that Telstra's chairman, Board and senior management had assured the government of their strong commitment to the sale. "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 Prime Minister said.
On its part, Telstra said the company would work with the government during the sale process to ensure its success, despite the telco's recent criticism of the nation's telecommunications regulatory regime.
"It is well-known that Telstra is critical of the current regulatory regime, but we accept our legal obligations under that regime. Telstra will fulfill its disclosure obligations during the sell down process," said McGauchie.
"This may involve explaining the impact of the regulatory regime on the company. Any comments will be proportionate, measured and factual. Telstra will not use such explanations or the sale process as a vehicle to campaign for changes to the regulatory regime."
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