govt flogging it off, page-14

I agree that one factor in the sell off may be the perception of a conflict of interest with the Future Fund being government owned and the government being responsible for implementing the NBN but I disagree that Telstra stands to gain from the NBN.

I interpret the strategy of the Future Fund to be one of selling now while Telstra is still quite profitable and able to be offloaded before the NBN really starts to hurt Telstra.

Some examples of Telstra's future challenges:

-Telstra losing its monopoly position and no longer being able to earn lazy monopolistic profits and having to become much more innovative and work much harder to maintain profitability with uncertainty as to the current Telstra leadership being up to the task.

-The NBN leading to a level playing field and greater competition from other telcos hungry to increase market share and used to being innovative.

-An inevitable steady decline in Telstra's lucrative fixed line telephone revenue.

-Free to air TV now offering multi-channels and on completion the NBN allowing the offering of services like downloading movies on demand which is likely to result in Foxtel losing a significant amount of its appeal and Telstra's 50% stake in Foxtel consequently becoming worth very very much less over time.

-Telstra's Yellow Pages business likely to become increasingly worth less and eventually obsolete and worth next to nothing.

Those managing the Future Fund which includes a former CEO of Telstra who might know something about the ability of those currently running Telstra to be able to innovate and successfully reinvent itself appear to have decided to sell off its Telstra portfolio now at what looks on the surface to be a bargain price. If it waited any longer to reduce its weighting in Telstra the Future Fund might well have to conduct an even costlier and more drastic fire sale than the one it is currently engaged in. Better to sell now while Telstra is still very profitable and has eager buyers suckered in by the current attractive 10.5% yield and looking no further than the immediate future.

Once Telstra's decline really starts to bight and the 10.5% yield begins shrinking who would want to buy over a billion shares in a company that is rapidly becoming a mere shadow of its former self? It may well be a case of the Future Fund living up to its name and after looking at probable future scenarios for Telstra deciding to sell now while it can before the effects of the NBN on Telstra really start to become apparent. Time will tell if it was a wise decision but the Future Fund may not be as stupid as some seem to think!