News that Nick Minchin is today expected to recommend the government sell only part of its 51.8% stake in Telstra suggests it is taking a far more realistic approach toward the T3 sale.
The finance minister is expected to propose that Canberra sell less than half of its remaining shareholding in the company, about $10 billion dollars worth, to institutional and perhaps retail investors, with the option of placing the remaining shares in the Future Fund. And while the price seems ambitious, it is not necessarily unachievable.
Telstra’s share price slid another 12 cents yesterday to $3.51 – its lowest level in almost nine years. This is happening because the financial market is totally unconvinced that Telstra can come up with the necessary changes to be successful in the longer term. But the company is underestimated – it has lots of potential. In fact, by hastily going into this the government could be selling its shares for too low a price.
A crisis situation should never be the impetus for a sale – especially of such a huge shareholding. Telstra is in a period of turmoil at the moment, making it difficult to estimate the company’s true worth. And while the infrastructure part of the company will always remain low, there are options to increase the value of the company that haven’t been investigated. The government could do everyone a big favour by seriously looking into what these options are.
Meanwhile, Telstra is trying to fight against the tide, which is not good for them, as it creates a situation where customers, staff and shareholders have no confidence in where the company is going and what will happen next. There is enormous growth opportunity in the telecommunications market, but we haven’t heard what their vision is. Certainly, things are moving very fast, but the rest of the world can cope with this, so why can’t Telstra?
Every single company press release complains about the regulatory regime and that doesn’t inspire confidence in what the company is doing.
In itself, the T3 sale won’t have a major impact on Telstra. But if it does go ahead, the worst case scenario – as far as the telco is concerned – is that it could be forced to make a structural separation. And it doesn’t want this.