Aims Telstra Sale at Small Investors
Bonus-Shares Program, Ad Campaign Inaugurate Frequently Delayed
By Lyndal McFarland
The Wall Street Journal
Tuesday, October 10, 2006
SYDNEY, Australia -- After months of delays and bickering, the
Australian government launched its prospectus to sell $8 billion
Australian dollars (US$5.94 billion) of Telstra Corp. shares,
with a marketing campaign aimed at local small investors.
Advised by three global investment banks, Canberra will offer at
least 2.15 billion shares in the telecommunications company, in
what will be one of the world's largest stock sales this year.
Known as T3 by bankers, the sale of one-third of the
government's remaining stake includes a bonus-share offer and is
targeting small investors who are well out of the money if they
held onto shares bought seven years ago. Canberra last sold
Telstra shares in 1999 at A$7.40 each, or US$5.50 at current
Existing shareholders will be entitled to one new share for
every two they hold, taking them to the front of the queue amid
speculation there will be a muted response from large
international funds. Small, or "retail," investors also will
receive one free share in 18 months for every 25 new shares.
Canberra will spend A$20 million on an advertising campaign over
the next few weeks.
Shares will be payable in two installments -- the first next
month -- giving investors three dividends before paying the
final amount 18 months later. This will boost the yield on the
new shares to as high as 14%. Retail investors initially will
pay A$2 a share, while institutional investors will pay A$2.10.
"It seems there is going to be quite a bit of stock for retail
investors," said Matt Williams, who helps manage A$20 billion in
funds at Perpetual Investments in Sydney. "T3 has the makings
of being a solid, but probably not spectacular, investment,"
said Mr. Williams, who holds Telstra shares.
T3 is the culmination of a 10-year ambition by Prime Minister
John Howard to remove Canberra from Telstra's share register,
ending the conflict between acting as regulator and equity
But the path to the sale has been far from easy, with Mr. Howard
last year hoping to sell Canberra's 6.44 billion Telstra shares
rather than having to park two-thirds in an investment fund with
links to the government. Feuding with Telstra management over
regulations, along with tough competition from rivals such as
Singapore Telecommunications Ltd. and a sliding share price, has
forced Canberra to constantly revise plans to sell its 51.8%
Telstra shares have shed 26% since Solomon Trujillo, an
outspoken U.S. telecom veteran, took over as chief executive in
July 2005. Shares in Telstra fell 2.4% yesterday in Sydney to
With a global sales-coordination panel consisting of UBS, ABN
Amro Rothschild and Goldman Sachs JBWere, Canberra also will
target big international investors. International investors
hold about 14.9% of Telstra's shares, with the prospectus
allowing a maximum level of 35%.
The new shares will be listed on the Australian Stock Exchange
Write to Lyndal McFarland at