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John Howard, Australia’s prime minister, said on Thursday the A$23.8bn privatisation of the country’s telecoms incumbent Telstra – the world’s largest share sale – might be delayed if its share price was deemed too low.
The comments are the strongest indication from the government yet that the sale may not proceed this year, and mark a major climbdown from February when Mr Howard told the FT the sale was essentially a done deal.
“We’re not in the business of selling at any cost … just for the sake of getting it off our books,” Mr Howard said in a radio interview on Thursday. “That would not be sensible.”
Peter Costello, treasurer, sent a similar message earlier this week, when he said the carrier would not be subject to a firesale. The cabinet is due to decide on the sale of the government’s 51.8 per cent stake next month or in June.
Analysts have questioned whether it would be feasible for the government to sell the stake when Telstra’s shares have fallen by more than 20 per cent in the past year.
Any move to delay the sale indefinitely would cast a shadow over Telstra, which has argued it needs greater certainty of ownership and regulation if it is to attract investor interest and redress a structural decline in its fixed-line business.
It would also be a blow for Mr Howard, who has made privatising the carrier one of the cornerstones of his leadership, alongside fighting terrorism and reforming Australia’s labour market.
In an interview in February, Mr Howard said of the Telstra sale: “I tend to look at it a bit in the past tense.”
The government has twice cut the size of previous Telstra sales; at the company’s 1997 initial public offering and in 1999, when it sold 16.6 per cent of the company for A$16bn.
The recent fall in the company’s share price has triggered growing speculation the government may transfer its remaining majority shareholding into the Future Fund, which was established by Mr Costello to manage a multi-billion dollar asset portfolio to finance future pension payments to public servants.
In a frank assessment unlikely to encourage potential investors, Mr Costello said that Telstra had been a “shocking investment”.
Since the government’s last sale of Telstra stock in 1999, its share price has more than halved from A$7.40 and is now at a near eight-year low.
Australian taxpayers had lost out on “billions and billions and billions of dollars” that could have been spent on health and education, Mr Costello said.
But Phil Burgess, Telstra’s group managing director for public affairs and communications, said share value was being “destroyed” by “intrusive and onerous” government regulation.
“If politicians align themselves with a bad policy, then they will get some of the shrapnel” he said this week.
The lead-up to the sale has been marred by an increasingly bitter battle between the telecom company and the Australian Competition and Consumer Commission, the country’s chief competition watchdog.