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Telstra sale likely to be put on hold
By Geoff Hiscock
SYDNEY, Australia (CNN) -- Shares in Australia's dominant telecom, Telstra, closed near a five-year low Monday as speculation builds that the government is about to postpone its full sale by at least a year. The Australian government holds 50.1 percent of Telstra. When it unveiled its 2002-03 budget in May, it set out a timetable to sell that stake in three equal lots from 2003-04. It aimed to raise a total of A$35 billion (about $20 billion) from the sales, making it potentially one of the biggest equity offers seen in the Asia Pacific markets. But because of a plunge in Telstra's share price, Treasurer Peter Costello is expected to announce the sale is on hold when he presents the federal government's 2002-03 budget update on Wednesday. His office has declined to comment on reports of a deferral, referring callers to Costello's most recent comments. Earlier this month, Costello told the Australian Broadcasting Corp. that there was a three-stage process before a Telstra selloff could proceed. Three factors
First, the government has to be satisfied about the quality of service provided by Telstra to rural and regional customers. That would have to be followed by legislation introduced to parliament, where the success of any vote would depend on the attitude of Australia's upper house, the senate. Costello said the third factor was Telstra's share price, because the government wants to maximize its return. At Monday's closing price of A$4.44, the government's share is worth about A$28 billion, or A$7 billion less than it hoped to raise when it flagged the sale in May. The Australian cabinet has also begun discussing a recent report on regional services, the Estens report, which found that Telstra's performance had improved in recent years But Telstra CEO Ziggy Switkowski acknowledged last week that it could be better. Parties oppose saleThe opposition Australian Labor Party is against the full privatization of Telstra, claiming it would create a "huge private monopoly which would totally dominate telecommunications and be almost too powerful to regulate." The Australian Democrats, a small party which holds the balance of power in the senate, is also opposed to Telstra's full privatization. On Monday, it again urged the government to drop its sale plan. Telstra closed 0.67 percent lower on a day the broader market, measured by the S&P/ASX 200 index, rose 0.18 percent. At one point on Monday, Telstra touched A$4.42 -- a five-year low and well below the A$7.40 that retail investors paid in 1999 when the government sold a second slice of the telecom, following on from the initial sale in 1997.
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