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Last updated: September 26, 2005 4:24 pm

Banks deliver tenders to lead $28bn Telstra sale

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Some of the world’s leading investment banks and broking houses on Monday handed in confidential tenders to manage the A$28bn (US$21.2bn) sale of Telstra, Australia’s dominant telecoms company.

The sale of the Australian government’s remaining 51.8 per cent stake, dubbed T3, offers potentially massive fee income for up to four investment banks acting as joint global managers.

A spokesman for Nick Minchin, finance minister, said the successful tenders would be announced in November but declined to name the bidders.

But UBS, which Canberra appointed to prepare a study into how the government should divest its stake, is considered a frontrunner, alongside Goldman Sachs, Macquarie Bank, and Deutsche Bank or Citigroup. Several others, such as ABN Amro Rothschild, and JPMorgan are also thought to have submitted pitches.

With so many investment banks involved in wooing Telstra and the government, T3 could invite more scrutiny from Australia's corporate regulator to watch for separation between banks’ research and advisory arms. Canberra approved T3 after an agreement within the ruling Liberal/National party coalition. Part of the agreement was the creation last Friday of a A$2bn Communications Fund to pay for telecoms services in rural and regional Australia.

“The provisions to facilitate the sale are broadly defined to allow not only conventional single-tranche sales, but also sales implemented through a number of tranches, or through the use of other market instruments and financial products, such as hybrid securities," said Helen Coonan communications minister. Mr Minchin is expected to present a sale strategy to cabinet in early 2006. Canberra hopes to secure around A$33.8bn for its 6.4bn Telstra shares. But the share price has fallen dramatically since the company warned profits could fall 10 per cent.

Retail investors, who account for two-thirds of Telstra’s shareholders, could also leave the stock after receiving a final dividend payment on Monday.

On Monday, Telstra’s share price plunged to a 30-month low, closing down 19 cents, at A$4.11. The last tranche, in 1999, was priced at A$7.40.

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