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Telstra Roadshow Abroad Receives A Tepid Reception
By Barbara Adam
The Wall Street Journal
Thursday, October 12, 2006

CANBERRA, Australia -- The first stage of the international roadshow for the Australian government's 8 billion Australian dollar (US$6 billion) offer of  Telstra Corp. shares hasn't wowed investors, Finance Minister Nicholas Minchin said yesterday.

The government's disposal of its stake in Telstra, Australia's biggest telecommunications group, will end Canberra's conflict of interest that arises from being the company's majority shareholder and its regulator.

Telstra Chief Executive Solomon Trujillo and John Stanhope, the company's chief financial officer, are meeting investors in London this week, after a series of appointments with U.S. fund managers last week.

"As is always the case with these roadshows, at some appointments they're very interested and at others not so," Mr. Minchin said in an interview.  "On balance they're reasonably happy with what's happening."

Telstra is trying to generate international interest in the company as it struggles with rising costs and declining revenue from its core fixed-line business.

In the days before the government released the Telstra share-sale documents, Telstra cut its long-term earnings forecasts and failed to guarantee its generous dividends beyond the current financial year.

Oppenheimer Capital of New York last month said it was unlikely to buy any shares in the Telstra offer, known among investment bankers as T3.

"Institutions are underweight, so there will obviously be a number of funds who will be interested.  It's a matter of getting to them with the right story," Mr. Minchin said.  "We want to generate what demand we can from U.S. institutions and European institutions, remembering Australian domestic and retail is going to be what it's all about."

The government has reduced its stake in Telstra from 100% ownership to 51.8% through share offerings in 1997 and 1999.

Telstra's stock price yesterday fell 1.1%, or four Australian cents, to A$3.67. The stock has fallen about 25% since Mr. Trujillo joined the company in July 2005 and it has more than halved from the A$7.40 sale price seven years ago.

After T3, the government's remaining stake -- about 35% of Telstra's issued shares -- will be transferred to the Future Fund, where they will be held in escrow for two years.

--Lyndal McFarland contributed to this article.

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