Big investor warns on Telstra
DANNY JOHN
March 16, 2010
TELSTRA'S second-largest shareholder has positioned itself to lead an investor revolt against the federal government's national broadband network.
In a presentation to investors, listed fund manager the Australian Foundation Investment Company warned Telstra shareholders not to be short-changed by selling the telecommunications company's fixed-line business to the government's $43 billion broadband network at a knock-down price.
The fund manager also questioned the need for the huge investment in the NBN, which is designed to deliver high-speed internet to most of the country using a new cable network and Telstra's existing ''pipes'' to homes and businesses.
The fund's managing director, Ross Barker, told shareholders at a post-half-year results briefing in Sydney yesterday: ''Telstra is entitled to get appropriate value for its assets, including its customer traffic. [And] shareholders are entitled to a fair outcome.''
Mr Barker said one of the main dangers of the federal government's plan was that the publicly owned NBN could easily become a new state-legislated monopoly. ''[The] government's actions continue to raise sovereign risk issues for investors,'' he said.
His comments come after Communications Minister Stephen Conroy raised the possibility that the NBN might not only provide the wholesale fast broadband services that present and new telecommunications providers would use but could also set itself up in competition by becoming a ''retailer''.
That has raised Telstra's ire amid the protracted negotiations between the company and Senator Conroy over the price that the publicly owned company set up to build the NBN will pay to acquire the Telstra fixed-line network.
Telstra chairwoman Catherine Livingstone and recently appointed chief executive David Thodey are battling a threat by the government to force the company to sell its 50 per cent stake in the pay TV provider Foxtel and prevent it gaining wireless spectrum for the next generation of mobile phones if it doesn't agree to terms with NBN Co.
This will be contained in legislation to be put to the Senate some time this year. The legislation is hostage to the timetable for the federal election.
But Telstra has reinforced its negotiating hand by saying that any agreement - including a mooted $8 billion price - for the sale of its fixed-line infrastructure to the NBN Co would have to gain the approval of shareholders through a formal vote.
The stance of investors such as fund manager AFIC is therefore considered important by Telstra as it seeks to avoid being cornered by the government.
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