The Australian government is to invite international banks to compete to underwrite the A$32bn (US$24bn) sale of its 51.8 per cent holding in telecommunications company Telstra, in what promises to be the world's largest equity offering.
The decision marks a breakthrough in a long-running saga and could enable the Telstra sell-off to take place by October or November next year.
The sale was made possible by the coalition government's election victory in both houses of parliament last year, only to be threatened by a senator from within its own ranks demanding guarantees on services to rural bush areas.
That final hurdle was cleared on Wednesday morning when coalition members approved a compromise to set up a A$3.1bn fund to ensure less profitable rural telecoms services would not suffer after the sale.
The privatisation of the government's holding in Telstra has been a long-standing policy goal of Prime Minister John Howard's centre-right coalition.
But the government has only a one-seat majority in the upper house, and a senator from the coalition National Party, Barnaby Joyce, had threatened to vote against the sale if it did not include guarantees of service quality for rural users.
Mr Joyce could not be reached for comment on Wednesday. It is unclear if the government's package, which includes A$2bn for rural telephone services and A$1.1bn for broadband internet services nationwide, will satisfy the senator.
He has sounded more conciliatory since the A$3bn figure was first floated, but has said he would like to consult with his constituents in the state of Queensland first.
Even with Mr Joyce on board, the government is expecting a bruising battle to convince the public. Recent opinion polls indicate that as many as 70 per cent of Australians are opposed to the sale.
The government plan also calls for operational separation of Telstra's retail and wholesale arms, a proposal that the company has been battling for some time.
Supporters say it will improve the competitive environment in the wholesale market, where Telstra's rivals claim it overcharges for access to its network.
Telstra shares have fallen since the government sold the last tranche of its stock for A$7.40 per share in 1999.
The company also scared the market last week by warning that its earnings in the 2005-06 financial year are likely to be weaker. The stock fell 1.4 per cent on Wednesday to A$4.79. See Lex