telstra may fund stock buy-up

http://www.theadvertiser.news.com.au/common/story_page/0,5936,12536569%255E911,00.html


Telstra may fund stock buy-up
By BELINDA TASKER in Canberra
14mar05

THE Federal Government is considering using the $30 billion-plus it stands to reap from Telstra's sale to snap up shares in other companies.

Finance Minister Nick Minchin yesterday flagged the option, saying the government could earn money by investing in other shares or bonds to pay for community services.

The idea marks a stark change in direction for the Government, which used the $30 billion from its two previous Telstra share sales in the 1990s to pay off debt.

It also ignores repeated calls by the Nationals for money from Telstra's sale to be invested in regional infrastructure such as road and rail projects.

Senator Minchin said he wanted to use the money to pay off debt or buy new income-producing assets, to replace the income from Telstra dividends.


"Obviously what the Government has at the moment is $30 billion tied up in a telephone company," he told Channel 10.

"If the government is going to have investments then it should have a spread of investments that produce income to help taxpayers and help provide the services that taxpayers want."

Labor attacked the plan, saying it was in stark contrast to Senator Minchin's opposition to the idea in June, 2002.

"If the Government is merely selling one income-producing asset for another, why is it selling Telstra?" Opposition treasury spokesman Wayne Swan said.

Queensland Nationals senator-elect Barnaby Joyce also criticised the plan, saying the Government should invest Telstra sale proceeds in infrastructure. Opposition Leader Kim Beazley said the government should be focusing on ensuring Telstra's services were adequate.

Investment bankers were locked in talks with the Finance Department this weekend in the hope of being chosen to play a role in the scoping study for Telstra's sale. Up to 12 investment banks are believed to be on the shortlist.