Telstra sale pushed back to 2006/07

The sale of Telstra Corp. Ltd. will not proceed until the 2006/07 financial year, according to federal Budget papers released this week.

The forward projections for budget 2006/07 headline cash surplus of A$12.8 billion (US$8.95 billion) take into account the sale of a block of the government’s 51.05 per cent stake in Australia’s largest telco. The underlying cash balance projection for 2006/07 is A$3.4 billion.

The government noted that the amount of money raised by the sale, likely around A$22.5 billion, would depend on the state of the world’s equity markets at the time.

While the sale of the government’s remaining shareholding in Telstra is dependent on the passage of legislation through Parliament, Finance and Administration Minister Nick Minchin said the long lead time was necessary to prepare for the sale, which would be difficult to achieve in 2005/06.

The Labor party remains opposed to the full privatization of Telstra. A key member of the Senate, Meg Lees has softened her stance on the sale welcoming discussion on the use of the money to fund national building and infrastructure projects including the regeneration of the Murray River.

“I think the message to government now is, move off ‘to sell or not to sell’, look at putting the proceeds from Telstra directly into the Murray River — that would be A$1 billion to A$1.5 billion a year for say 10 years; that would make a massive difference,” she said.

Treasurer Peter Costello said this week that the privatization issue had to be resolved as the company left behind its history as a utility, expanding into new areas such as computer software and international cable television.

He said it was way beyond a basic phone company and Australia should follow other developed countries by accepting full privatization.

“I think like most of the other developed countries … we need to resolve its status one way or the other,” Costello told the National Press Club on Wednesday.

He sidestepped questions about whether the government would use proceeds from the sale on infrastructure projects.

“The only point I’ve made about when you sell off capital assets (is that) you shouldn’t dissipate the proceeds,” he said.

“If you sell off the family silver and you spend it on champagne, at the end of the day you’ve got no family silver and you can’t pay next week’s champagne bill.

“And that’s why we’ve used the proceeds to retire debt.”

Costello said Telstra’s interests were diverse, ranging from the Internet to pay TV and software.

“The government shouldn’t be owning a corporation that’s backing itself into Hong Kong deals and software development and cable TV,” he added.

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