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Telstra shares hit nine year low -

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Telstra shares hit nine year low

Broadcast: 21/08/2006

Reporter: Helen Brown

Shares in Telstra hit a nine-year low today, as the Federal Government prepares to discuss the full
sale of the company.


TONY JONES: The Telstra share price plunged to a nine-year low today on the eve of a Federal
Cabinet meeting to discuss the sale of the Government's majority ownership. The Government has to
decide if offering its shares to the marketplace will drive the price down further and if it should
place them in the future fund instead. Meanwhile, Telstra has announced it will be giving
shareholders something back next year, but says it will also lose revenue because of a decision by
the corporate regulator. Helen Brown reports.

HELEN BROWN: What to do with Telstra? That's what the Government may decide this week. And on the
day the share price ended down on $3.51, the Prime Minister wasn't giving much away.

JOHN HOWARD, PRIME MINISTER: I don't intend to comment further than to say we are looking at this
matter this week and there's not much point in speculating as to what we might do except that we'll
try and do the right thing by the current shareholders of Telstra.

HELEN BROWN: Some backbenchers want the nation's 51% shareholding to be placed in the future fund,
the entity created to cover public service superannuation liabilities.

GREG CANAVEN, FAT PROPHETS: From a shareholders' perspective the future fund is the last place
where you'd want the shares to continue to be held.

HELEN BROWN: And the head of Telstra wants the T 3 sale to go ahead.

SOL TRUJILLO, CEO, TELSTRA: If you're an existing shareholder, a T2 shareholder, and you bought in
at $7.40, it is in your best interest to get as many shares out in the market and placed and not
have an overhang if, you know, the whole lot was put into a future fund.

HELEN BROWN: Analysts say parking shares in the fund would effectively cap the price, because
there'd be a huge block of stock that could be put on the market at any time. The Opposition says
it's clear what the Prime Minister's next move should be.

STEPHEN CONOY, LABOR COMMUNICATIONS SPOKESMAN: He could cancel the sale. That would restore some
certainty to the market and it would take away the overhang that would be created by putting it
into the future fund with plans to sell.

HELEN BROWN: There was some good news for shareholders, though. Telstra announced it will pay a 28
cent dividend for the 2007 financial year.

BEN CANAVEN: Telstra has held out a bit of a carrot to the Government by saying they are committed
to paying dividends and are virtually sort of giving the Government an excuse to go ahead with T3,
which is in the interests of Telstra management and shareholders.

HELEN BROWN: But it says recent regulatory decisions mean it's had to cut its revenue forecast. In
the last couple of weeks, the Australian Competition and Consumer Commission has ruled that
Telstra's wholesale customers, competitors such as II Net, should have access to the nation's
copper phone network for around $4 a month less. It's an interim decision only, but one that
Telstra says will affect its margins and one that it needed to tell investors about. Today's share
price fall was also effected by the fact the telco was trading without its 14 cent dividend.