Telstra obliged to reveal all: expertsSeptember 7, 2005 -...

Telstra obliged to reveal all: experts
September 7, 2005 - 3:19PM

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Corporate governance experts say Telstra had an obligation to reveal any financially sensitive information to all of its 1.6 million shareholders.

The experts believe Telstra should not be treating the federal government - a 51.8 per cent stakeholder - any differently to its other shareholders when it comes to revealing price-sensitive information.

The federal opposition claims Telstra's executives gave Prime Minister John Howard and senior ministers a secret document at a meeting last month.

But the information, which revealed Telstra was borrowing from its reserves to pay shareholder dividends and that there are faults in almost 14 per cent of its phone lines, was not given to the stock market or other investors in the telco.

"There appears to have been a number of discussions held between Telstra and the government which really should have been made public," Australian Shareholders Association (ASA) deputy chairman John Curry said.

"So there is a clear breach in my view of the disclosure provisions and that is the fault of the Telstra board, and I suspect probably the fault of the government."

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AdvertisementThe Australian Securities and Investments Commission (ASIC) is investigating whether Telstra broke market rules in relation to a profit warning released by Telstra on Monday, which sent its share price tumbling and wiped $1.5 billion off the company's market value.

Telstra said it had complied with all its disclosure obligations and all material provided to the government was provided in accordance with the requirements of the Telstra Corporations Act.

The ASA's Mr Curry said he also strongly disagreed with Mr Howard's comment on Tuesday that: "the obligation of senior executives of Telstra to talk up the company's interest, not to talk them down".

Mr Curry said it was never an executive's job to talk up the share price.

"That is not their job at all. Their job is to keep all shareholders fully informed and the government is just one shareholder out of 1.6 million and no shareholder should get any information before any other shareholder even if (they) own 52 per cent of the capital."

Mr Curry said the Telstra had no obligation to speak to the government before its remaining shareholders.

"No they don't, their obligation is to all shareholders as a board of directors, and if they feel something has happened that is not right, then they should make a release to the stock exchange so that everyone can see it."

The Australian Council of Superannuation Investors, which advises super funds on governance issues, said Telstra had an obligation to its shareholders.

"I think that is the underlying premise of the continuous disclosure provisions, so the short answer is yes," executive officer Phillip Spathis said.

Frost & Sullivan Australia telecommunications analyst Chia Frost said it was disappointing for the industry if Telstra had underinvested in its network.

The secret document showed that Telstra had borrowed $550 million from its reserves so it could pay healthy dividends to shareholders in 2005 and a further $2.2 billion to cover next year's payouts.

It also revealed Telstra had failed to make necessary investments in its network and needs up to $3 billion to fix its problems including flaws in more than 14 per cent of its lines.

"From a technology point of view, if it is the case that there has been an under-investment in the network, it is disappointing, and the sooner that issue is addressed, the better," Ms Frost said.

© 2005 AAP
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