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Existing shareholders in Telstra, Australia’s dominant telecommunications company, will be offered preferential terms to buy into the government’s A$8bn ($6bn) planned public offering, according to bankers working on the share sale.

On Friday, John Howard, the Australian prime minister, announced that the government would sell more than a third of its remaining 51.8 per cent stake in the incumbent operator, currently worth A$22.6bn, to retail and institutional investors. The rest will be parked in a special fund for at least two years.

Chris Mackay, a UBS banker who advised the government on Telstra, told ABC television on Sunday one of the key goals was “to encourage Telstra shareholders to stay on the register,” so that “we will have an attractive entitlement offer for existing shareholders.”

Mr Mackay’s comments are the clearest signal so far that the government will try to structure the offering in such a way as to attract new shareholders while mollifying existing ones.

Mr Howard is aware that ordinary retail shareholders, the bedrock of his political support, who bought into Telstra when the government sold its second tranche of stock, are nursing huge losses. They bought in 1999 at A$7.40. The share price has recently fallen to a nine-year low and closed unchanged at A$3.50 on Friday.

Mr Howard’s announcement was made after Friday’s market close and many analysts expect the share price to fall further today, after losing 4 per cent last week, as investors share concerns expressed by Sol Trujillo, Telstra’s chief executive, about the “overhang” created by parking most of the stake in the Future Fund, created to cover future state pension liabilities.

Existing shareholders are likely to be offered new Telstra shares at a discount, which could take the form of one discounted share for every five shares held. However, the exact terms of the share sale are not expected to be set before early October when Telstra is also due to update investors on its prospects and overhaul strategy.

UBS, Goldman Sachs JBWere and ABN Amro Rothschild have been named joint global co-ordinators for the share sale. However, banks, including Macquarie, Australia’s largest investment bank, are still jostling to join the retail syndicate.

Telstra has 1.6m individual “mum and dad” shareholders to whom the government banking advisers will seek to appeal.

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