Wall St was down 94 overnight, its biggest fall in a month, while the local market is down 66.
High fliers at the core of the Telstra shareholder revolt
|
You’ve undoubtedly heard of the revolt by Telstra shareholders against the government’s structural separation plans, especially if you read the AFR . Perhaps you imagined that the said shareholders were mums and dads of Howardian fable, ordinary Australian voters whose simple but touching faith in the conservative dream of a shareholder democracy has been betrayed by the Rudd government’s socialist impulses. Or something. A closer examination of the “revolt” shows mums and dads have nothing to do with it. The criticism of Stephen Conroy’s demand that Telstra separate its infrastructure and retail operations comes from a clique of some of Australia’s wealthiest men and, inevitably, the big banks. These are the outfits that are most commonly mentioned as forming the core of the “shareholder revolt”.
The Treasury Group’s role in the revolt is interesting because it also owns a huge chunk of Investors Mutual, making it a key player in the campaign. If AFIC’s Bruce Teele is an establishment pillar, Treasury Group’s chairman and part-owner (and sometime vintner) Mike Fitzpatrick is the new Victorian establishment — AFL chairman, ALP-connected, on so many boards he has been accused of conflicts of interest. These are all fund managers. They make money managing money, and they are all very good at it, which is why so many of them have fortunes in the hundreds of millions. Several of them are notable for their conservative investment strategies, involving taking and holding blue-chip stocks like the major banks — who own or part-own several of them — and giant companies such as Telstra. They are only interested in maximising the profits of the companies in which they invest. They have no interest in the wider economic impacts of corporate behaviour, and have a direct incentive to oppose competition — something about which the cartel that is the Australian banking sector knows quite a bit. Their lack of interest in wider economic issues was shown when Tagliaferro and AFIC’s Ross Barker fronted the Senate Communications Committee’s hearings on the Telstra Bill three weeks ago to attack the government’s approach. Both were asked by Labor’s Kate Lundy — herself well-versed in telco issues — whether they had made submissions to the government’s previous consultation processes and discussion papers on telco reform. Neither had. “That’s a very good question,” Barker told Lundy. “We missed the opportunity.” Tagliaferro also has plenty of history on Telstra. In Tagliaferro’s view, Telstra’s board and management have had less to do with the company’s dire stockmarket performance in recent years than governments. It was, therefore, not the havoc wreaked by Sol Trujillo, of whom Tagliaferro was a strong supporter, that caused Telstra share price to collapse but the Howard government. At the Senate hearing Tagliaferro repeated this view, saying “over the last few years Telstra’s share price has been hampered and hurt by several regulatory changes”. It’s probably fair to say that Tagliaferro is in a minority — possibly of one — in thinking it was John Howard who caused the 30% slump in the Telstra share price during Trujillo’s tenure. Any views of Tagliaferro on telco regulation should therefore be put through a reality filter first. His personal submission to the Senate inquiry borders on the hysterical, calling the government’s legislation “immoral”, “an absolute disgrace” and “ridiculous in the extreme”. What’s just as intriguing is that this shouldn’t be a case of private interests versus the public interest. Deutsche Bank and Goldman Sachs JBWere issued analyses last week maintaining their Buy recommendations for Telstra despite of Conroy’s proposed approach. Deutsche’s 12-month share price target was $3.70; GSJBW’s was $4.40. “Telstra remains our #1 pick in the telecoms sector,” the latter concluded. Evidence that the government’s proposed approach is the “draconian” assault on shareholder value looks thin indeed. Whatever the Telstra “shareholder revolt” may be, it shouldn’t be confused with a legitimate contribution to the debate over telco policy. These are some of Australia’s richest people, backed by our cartel-like banking sector, pushing their own interests, even when the evidence is that structural separation might indeed be, if not the “win-win” Stephen Conroy insists that it can be, then hardly damaging to the “#1 pick in the telecoms sector”. |
|
|
15 Comments
The Rudd government had better get this legislation through quick smart. Telstra and its goons are rolling out the astro-turf, and it’s going to get ugly.
It’s times like these than make me glad I hung onto my froggy.com shares. Yessir!
Please Bernard, read the Senate submissions again - quite a few concerned mums and dads have written in - and that is very unusual as they are normally very ‘conservative’ when it come to writing to ‘the authorities’. You are wrong about this, it is bad legislation and how on earth the Government can expect ‘the public’ to buy the new NBN Co warrants or shares or whatever they issue in this new telco share float is beyond me. You talk about a Ponzy scheme! T1, T2, T3 all sold by the Government for TOP dollar to the mug mum and dad punters - then the lot is Nationalised by Government (ie taken back) under threat of being run out of business at bottom dollar - and then sold off again as ‘new’ T5 no doubt at top dollar again!! Honestly, how idiotic do you think we all are? Please leave Canberra soon, it is affecting your judgement something chronic. 7 point drop in Government polling? Nothing to do with refugees, all about the extremely poor decisions this Government is PILING up.
Spare us, indeed. With each tranch, shareholders have been warned of the risks. From the prospectus:
“You should recognise that the price of Telstra shares can fall as well as rise. The price at which the shares trade may be higher of lower that the price you pay for the shares. Many factors will affect the price of the shares of Telstra, including overall economic conditions, changes in government policies and movements in interest rates or stock markets.”
“The government, or any future government, however, may change its policy as to the regulation of the telecommunications industry, which may adversely affect the competitive position or results of operation of Telstra”
Every investment is a risk, and in this case the risks were clearly stated for all to see. T2 shareholders may have been burnt, but T1 and T3 investors are in the black. Time to cash out and invest somewhere else for those who are worried about government regulation.
… and my One.Tel share certificates are around here somewhere …
I agree with Spare Us.
I see Jeebus quoting small print legalese common to any new company prospectus and almost the precise wording to be found in any new communication company prospectus.
But where does it say: “We the government who sold you this stock promising that it was a good buy but obviously no vendor can give absolute guarantee but a later dishonest government might force the split-up of your company and thus devalue your stock when it suits them because another later government can’t be ars-d honouring the implied moral contract after they f-ck up their election promises”?
The small print may protect this dishonourable shyster Rudd from legal obligation but not a moral one.
I’m betting not only that Jeebus owns no Telstra stock but owns no stock whatsoever because he clearly has no empathy with his fellow Australians who are brave enough to be investors.
There won’t be so many willing to risk in the future given this government’s bovver boy banana republic attitude, I’ll venture.
Let’s see what the take up for the NBN will be shall we?
ROTFLMAO
Great backgrounder. Sunlight.
How could you possibly conclude that “mum and dad” Telstra investors are any less concerned about the Government’s plans for Telstra than are the funds managers and Super funds. The majority of submissions to the recent Senate Committee covering the proposed legislation were from “mum and dad” investors. Nearly all condemned that deceitful and outrageous proposed legislation.
Outside of former Eastern Block and other dictatorships, few Governments have sought to punish their “little people” in such a way. The possibility of an Australian Government going down such a road was recognised by our founding fathers when they included in the Australian Constitution section 51 (xxxi) stating that the acquisition of property by the Commonwealth be on just terms. No doubt Government lawyers feel they have found a way around the constitution in the case of Telstra but “mums and dads” are not fooled by such cynical and dishonorable behavior.
I did vox pops today! http://itnews.com.au/News/159768,telstra-shareholders-give-us-a-fair-price.aspx
@jeebus. Regulatory risk - even sovereign risk - can be dealt with, but daylight theivery by Government pretending to be “for the people, of the people and by the people” is a bit rich. If you or I tried to do this at the local petrol station we would be locked away and not allowed to vote for a while - a long while even - and if done with serious malice, as is the case with Telstra assets - maybe for a very very long time. Maybe this is what will happen with the Ruddites when finally caught ‘out’. Sadly the ‘form’ is building with this lot…and the other lot (not much better) will undoubtedly exploit the ‘regulatory’ risk that all Australians face with such people…..(ps. if you need me to explain it in greater detail, please just let me know)
Jeebus you are of course right that everyone has fair warning (and negligent parents if they haven’t) from the age of 5 that governments may behave dishonestly, deviously, capriciously (thought that is just the light-hearted waywardnes a minister might think it good that you believe in rather than true Machiavellian reasons) or just plain stupidly. It is ridiculous for RIO or indeed Stern Hu’s family to complain about someone being locked up by the Chinese government in aid of negotiations or intimidation when they can’t have been in any doubt that that is exactly the way Chinese governments have often behaved and indeed interpret their laws to allow.
One would think Conroy’s performance was demeaningly disgraceful if one thought he was any more autonomous than the wretched Kevin Andrews was with the incompetent introduction of WorkChoices.
At bottom, it is even worse, because the whole $43 billion nonsense was dishonestly conceived without the slightest reason for saying it would cost that amount or that spending that amount on it could be justified (not that it gave any serious attention to the timing of costs which, if spread out over 50 years might happen to be an appropriate NPV of, say $12 billion).
Why not let Telstra build the network in a subsidiary fully financed by equity capital and give users of Telstra’s network proportionate rights [proportioned to their share of telephone and data traffic] to take up shares at a price per share which is what Telstra paid plus 15 per cent per annum compound? That way they will all share the costs of uneconomic extensions of services to the bush and the costs and benefits of Telstra keeping the copper network going.
@HINESJS1 and @JULIUS - nicely put both of you. Is the boy ‘genious’ Minister listening? Maybe just out there spilling more commercial-in-confidence Telstra secrets to the opposition? Imagine negotiating a sensitive multi billion dollar deal with these guys!! No wonder the Chinese love this Government and our Manchurian Candidate…….we could all be speaking Mandarin, or one of the other dialects, very soon….and maybe that is better for all of us in the end anyway. We just can’t seem to get any serious traction from the political Class on fairdinkum Nation building. Clearly the Australian Parliament is a sinecure and a sheltered workshop. Very sad indeed as this could be such a great place to bring up kids and grandkids……..talk about Senators in Wonderland or should that be yo-yo land? Ring the bells it is ‘play-time’ children…..
To overuse horse puns again it seems as though the telstra investors got a champion who wins every race. The investors want to keep on winning and the government and the rest of the industry are trying to handicap them. To even the odds the government is doing what the previous government should have done and seperate the company from the infrastructure. If they did this originally they would not have got such a high price. Once again shotrt term political capital intefered in long term good.
I believe they have had a ten year free run and should never have owned the infrastructure in the first place. Ten years of rent seeking and now they will have to compete on equal terms. Why do telstra’s shareholders fear fair and even competition? How long do they expect the rest of the industry to pay them?
Why the surprise? Overseas governments have broken up monopolistic carriers - ours can too. And the ‘wires’ part of Telstra is indeed a monopoly.
Disclaimer: I own some Telstra shares, and still think its a good idea.
Register now to join the conversation instantly, or log in to post a comment now.