UBS, Goldman Sachs and ABN Amro have won the mandate for the sale of the Australian government’s remaining stake in Telstra, a much-coveted deal that could generate up to A$100m (US$74m) in investment banking fees.
Dubbed “T3”, the sale of the government’s 51.8 per cent stake in Australia’s dominant telecoms provider could be the world’s largest equity offering next year and one of the largest ever at more than A$25bn (US$18.5bn).
But the banks will face an uphill battle to make the stock attractive. Telstra’s value has dropped 40 per cent since July, with its share price hitting a record low of A$3.90 yesterday. Canberra did not offer reasons for selecting the three banks but they have all worked closely with Telstra in the past. UBS performed the scoping study for T3, while Goldman and ABN Amro were involved in the previous sale of Telstra’s stock in 1999, which was priced at A$7.40 a share.
“These appointments are important in terms of progressing sale preparations so the government can be in a position, if it so decides in early 2006, to proceed with a possible sale later in the year,” Nick Minchin, finance minister, said.
Other banks that pitched for the deal were Australia’s Macquarie Bank, Deutsche Bank, Morgan Stanley, Citigroup and CSFB.
Some could still be involved in the sale as joint co-ordinators if the market appetite for the stock demands more expertise. Telstra’s shares are expected to be pitched heavily to US, European and Japanese investors. The Australian government could decide in the first quarter of next year whether to sell all of its 51.8 per cent stake in Telstra or to sell part of it and then transfer the rest into a fund set up to cover public sector pension liabilities.
But the government appears to be in no rush to proceed with the sale. Investors have reacted negatively to Telstra’s performance and the likely success of a turnround plan introduced by Sol Trujllo, the telecoms group’s chief executive. Mr Trujillo told the Financial Times last week the restructuring plan, under which Telstra was to invest heavily in broadband services, would take three to five years to be realised.
Telstra has issued two profit downgrades in the past 10 weeks and is facing public anger over plans to cut 12,000 jobs.