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August 24, 2006
Telstra can't win a trick these days. Its strategy of attacking the regulatory regime, a policy of non-cooperation with the government and poor investment decisions has driven Telstra's share price to record lows. The stock doen't even look cheap at rock bottom price of $3.50, given the falling earnings caused by increasing competition. Yet the current mess---it's looking increasingly like a disaster for everyone---is not solely Telstra's fault.
Alan Moir
It is more than Telstra's case that regulations eroding profits. The Howard government continually put off confronting the need to address Telstra's dominant network structure, and even the fair terms and conditions for its rivals to gain access to the dominant network in an rapidly changing industry. It was obsessed by ownership---privatisation---and still is; even though the conditions for a sale are not good. It does not have any doubts that a privatised Telstra will provide Australia with a good and modern broadband service.
The T3 float beckons. Will there be a T3 sale or not? Telstra will be sold. It's just a matter of how and when. Sell it now is the call. Free Telstra says the market. The market analyists say that the longer the Government puts off making a decision, the more it weighs on the share price. The share market hates an overhang and there's around 6 billion shares to be sold. So what form will it take? A fire sale? The shares go into the Future Fund?The latter is not going to remove the overhang problem. So sell the whole lot and get it off the Government's hands.
You get the idea that the government just wants to toss all the problems to industry and let the market decide the best way for a modern telecommunications network to help secure Australia's future prosperity.
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Yep, and secure a nice little kitty to take to the next election.
The real reason why the sale will go ahead - favourable or not.