Canberra sticks to Telstra plans
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The 7 per cent fall in Telstra’s share price sparked by this week’s dramatic strategic review will not affect the timetable of the Australian company’s full privatisation, the government minister in charge of the sale said yesterday.
Canberra plans to sell its remaining 51.8 per cent stake late next year and has targeted a sale price of A$5.25 a share to generate revenues of A$34bn (US$25bn).
Analysts now increasingly believe the government might have to delay the sale to stand any chance of meeting its desired revenue target.
The government’s stake is currently worth A$26bn.
However, in an interview with the Financial Times, Nick Minchin, finance minister, said Canberra remained committed to its sale timetable and would not be deflected by “short-term” events.
“The government will decide in February or March whether to proceed with the full privatisation of Telstra. Nothing has changed.”
The government is next week expected to name the investment banks charged with co-ordinating what would be the world’s largest ever equity offering.
Telstra has 60 per cent of the country’s A$35bn a year telecoms market.
The company’s announcement prompted a raft of share price downgrades yesterday as analysts digested the strategic u-turn. Citigroup lowered its target price 14 per cent to A$3.75 with similar sentiment at Goldman Sachs JB Were, Merrill Lynch and Macquarie Bank.
Morgan Stanley called the new strategy “a bold leap into the unknown” and warned: “The company is taking on significant execution risk and we are sceptical the long-term financial targets can be met.”
The share price fall will add to pressures building on Sol Trujillo, the recently-appointed Telstra chief executive, who is embroiled in a public war of words with the government over what regulations the company should face after it is privatised.
But Mr Minchin said: “I think he remains the right man for the job of giving this company a strong future and a strong strategic direction.”
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