Australia hits new Telstra privatization hurdles

September 4, 2005

The Australian Government's plan for the full privatization of Telstra, Australia's dominant telecommunications company, received criticism leveled at the government and company by executives. The government owns 51.8%, with the remaining 48.2% of Telstra stock held by shareholders, having been partially floated in the 1990s.

Phil Burgess, senior executive, made comments that Telstra was "a loser" hindered by excessive regulations and that he would not recommend purchasing the shares to his mother. The government responded, with Treasurer Peter Costello telling the Telstra management to manage the company and leave industry regulation to the government. Prime Minister John Howard repeated those sentiments, saying Telstra's problem was government ownership over government regulation.

There are plans for introducing legislation next week which will approve the sale of the remainder of the government's share. This is the first time such legislation will have gone through the Senate with the Coalition, consisting of the Liberal and National parties, controlling both the Senate and the House of Representatives. This may allow the predominantly Liberal-backed proposal to be passed. However, members of the National Party have spoken out against full privatisation, citing concerns over the future of less profitable rural services. A major base of support for the National Party is in rural areas.

Two major financial institutions divested their Telstra stock as shares dropped to their lowest point since mid last year.