Telstra shares recovered 5c to $3.50 this morning as the government, the Telstra board, a team of investment bankers and Sol Trujillo hope that yesterday’s intra-day low of $3.43 will never be reached again.

While the retail investors who paid $7.40 and the institutions who paid $7.80 in T2 are now about $10 billion underwater, yesterday we got perilously close to investors in T1 also falling into negative territory for the first time.

T1 was priced at $3.30 for retail investors and $3.40 for institutions, but it was an instalment offer in which the initial payment was only $1.95. The shares closed at the equivalent of $4.02 after the first day’s trading, so the prices we are currently seeing are unquestionably record lows.

However, in assessing Telstra’s performance you also need to consider the large flow of dividends that have been paid over the years. After this week’s 14c payment, the total has reached $2.33, meaning that investors in T1 have still had a good ride because a $10,000 investment is now worth $17,515 when you include dividends.

Dividends are an important consideration when considering the Howard Government’s financial position as well. On top of receiving $14 billion from T1 and $17 billion from T2, the government has collected about $20 billion in dividends since March 1996, including a $3 billion special dividend shortly before T1.

If the government can land $20 billion from T3 it will have pocketed $71 billion in total from Telstra, plus all those corporate taxes it pays from those super-fat but contracting profit margins.

The Government really does deserve the majority of the blame for Telstra’s current weak share price. After all, it was John Howard’s cabinet who installed former CEO Ziggy Switkowksi and chairman Bob Mansfield, who led the team which lost billions on ill-fated acquisitions in Hong Kong. Even smaller deals like buying Trading Post appear to have turned sour.

The government also hasn’t helped with its anti-Foxtel regulations. And now the ACCC is inflicting further damage with its belated attacks on Telstra’s wholesale pricing regime, which is out of step with the way it treats every other dominant incumbent in other markets.

Sure, Sol Trujillo might have talked the share price down, but this is perhaps just a result of pointing out some home truths. After all, Sol hasn’t actually botched any acquisitions as his focus has been on cleaning up the basics and getting Telstra into a fast broadband world, something the government and the ACCC are not exactly encouraging.

Maybe it’s time the government looked at a Coles Myer-style break-up of Telstra to extract some value. Sensis has been ready for a demerger for 15 years, although even it appears to have lost its fast-growth edge and is now even looking at outsourcing jobs to India to improve profits.

* Tune in to Australia Talks Back on ABC Radio National tonight at 6pm for a debate about Telstra involving National Party MP Paul Neville, SMH economics editor Ross Gittins and a certain twice-failed candidate for the Telstra board.