Modia Minotaur

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Friday, August 25, 2006

Telstra On The Block

In the past few minutes, John Howard has announced that it is the `unanimous advice of the government's investment advisors' that the full sale of Telstra should go ahead ASAP, with an $8bn tranch to be sold off to private investors between September and November, and the rest to be parked in the Future Fund for later sale. The sudden announcement comes even despite the fact that Cabinet could come to no conclusion on the issue only three days ago.

Clearly, these advisors have forgotten about Telstra's recently reported worst-ever annual result - or that investors in T2 have seen their shares almost halve in value, from $7.40 at purchase to $3.50 at the present time.

Given this performance, who exactly will these `private investors' be? Could anyone who was silly enough to believe the hype about T2 still be silly enough to imagine that buying low now will be selling high in the near future? Can anyone possibly be interested in investing in a company that uncomfortably straddles the regulatory imperatives required of a major government utility with the monetary (and statutory) imperative to return money to their investors? When I've suggested in the past that Sol Trujillo had a right to demand less regulation, I was certainly not playing the devil's advocate. Instead, the simple truth is that the reasons government utilities are set up is, and will always be, in fundamental opposition to the reason a corporation is set up. If you don't want decisions made on the basis of what makes money rather than what's best for the people of a nation, corporatise, corporatise, corporatise. The same is true of the Snowy Hydro Scheme, and the political dilemma that surrounded it is, as is the full sale of Telstra, a demonstration of how governments abrogating their basic duties to their people - often in order to avoid scrutiny and blame when mistakes are made - can eventually comes back to bite them.

The full sale of Telstra is the culmination of the corporatising and privatising zeal that countries such as Argentina have already had great cause to regret in retrospect. I imagine we'll be telling our grandkids about it one day. That is, if we can get them on the phone.

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