Lex: Telstra

It's all a bit glum down under. Australia has lost cricket's Ashes trophy and seen US$7bn wiped off the value of its telecoms giant in the past month. On Wednesday, as the Senate approved the full privatisation of Telstra, the shares closed at A$4.36.

That deals a golden duck to the government, which reckoned it could reap A$5.25 a share from the sell-off, and to investors who paid A$7.40 a share the last time Telstra offered shares.

Last month, Telstra indicated operating profits would fall 7-10 per cent this year, which means despite the recent 15 per cent slump in the stock it is still one of Asia's more expensive integrated operators. The government's bizarre attempt simultaneously to deregulate the telecoms market has whipped up a right barney. Telstra management is milking the situation to extract regulatory concessions.

Canberra is on a sticky wicket. More consumer choice is laudable, but not strictly compatible with the needs of investors who see a declining earnings stream and dividend in jeopardy.

Meanwhile, plans to separate the wholesale and retail functions also look likely to end in a fudge. Advantageous rates to the retail arm could continue, perhaps under a bulk user scheme.

Conversely, infrastructure would crumble if Telstra argued it had lost the incentive to invest. On many broadband measures, including operator choice and terrestrial availability, Australian customers are worse off than Brits, Americans and Japanese. For Telstra investors, it looks as grim as it did at the wicket.

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