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Last updated: September 14, 2005 4:14 pm

Australia to sell its controlling stake in Telstra

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Australia’s senate on Wednesday approved legislation for the A$28bn (US$21.7bn) full privatisation of Telstra after the government won the support of a wavering senator and defied opposition pressure for more scrutiny of the bills.

The upper house, voted for five bills to sell the government’s remaining 51.8 per cent stake in Telstra,  paving the way for the final approval of the sale legislation by the lower house on Thursday.

Once approved by the lower house, a formality as the coalition government has a majority, it will set in train the planned sale of Telstra, dubbed T3, in 2006.

The government hopes T3, likely to be the world’s largest market offering next year, would achieve a price of A$5.25 a share. The previous tranche of Telstra shares sold in 1999 at a price of A$7.40. The company’s share price closed flat today at A$4.36.

The government used its senate majority, with the support of Barnaby Joyce, a National party senator who had earlier opposed the sale legislation, to gag debate on the bills, sparking scenes of outrage from the opposition.

David Forman, spokesman of the Competitive Carriers Coalition, a lobby representing rival telecoms companies, said “people’s heads are spinning” after the government pushed through the sale legislation.

The government permitted one day of public inquiry into the bills. “We have to assume that [the government is] are rushing into this for political not policy reasons,” he said, a reference to government concerns about Mr Joyce’s wavering support for Telstra’s privatisation.

The legislation proposes an “operational separation” of Telstra, the former telecoms monopoly, into three business units comprising its retail and wholesale arms. But it remains unclear what Telstra’s operational separation would mean in practice, and no details were outlined in the legislation.

As a result, some lawmakers and Telstra’s competitors fear that the fully privatised Telstra could abuse its market dominance. Mr Forman’s group claims the legislation would give Telstra powers to define its own operational separation plan and to decide what compensation it would pay if it breaches that plan. Such uncertainty has arisen because the government has not yetreleased the rules that would govern a fully privatised Telstra.

Australia’s competition watchdog has raised some concerns about Telstra’s operations, but Canberra has declined to release the information.

More than two-thirds of Telstra’s shareholders are small investors. Australia’s conservative coalition has promoted the company’s privatisation to encourage share ownership among Australians.

Meanwhile, Telstra has confirmed it is in talks with Brightstar, a Miami-based cell-phone distributor about a reported plan for Brightstar to take control of Telstra’s mobile phone warehouse and distribution business.

Sol Trujillo, Telstra’s chief executive, and his counterpart at Brightstar, Marcelo Claure, both participated in a capital raising earlier this year by a company known as Silk Road Telecommunications.

But Telstra has rejected any conflict of interest. The company said Mr Trujillo “would not stand to financially benefit in any way from any relationship between Telstra and Brightstar.”

 

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