Australian Govt. sells A$4bln of Telstra Stock

In the first stage of its plan to sell a third of its stake in country’s major telecommunications company, the Australian Government has sold A$4 bln (or $3bln) worth of shares in Telstra Corp Ltd to brokers and financial planners.

In a statement released on Sunday, finance minister Nick Minchin said that the Government has sold third of its 51.8 pct stake in the nation's largest telecommunications group, holding a dominant position in landline telephone services.

The prospectus was released nearly a fortnight ago which depicted that the government has assigned 1.1 billion of shares for the broker and planning community, half of the total A$8 billion of shares on offer.

Minchin said 1.1 bln shares were sold to brokers and financial planners who applied for allocations on behalf of clients, while the government received applications for 1.6 billion shares. The remaining A$4 bln stock will be sold to retail and institutional investors in Australia and Japan before the scheduled listing of the shares on Nov. 20, the statement said. The offer to retail investors opens today (Oct 23) and closes on November 9.

The government is gratified by the level of support for the sale which is expected to increase more than A$8 bln in total, Minchin said in the statement.

In an attempt to sell a stock that has dipped more than 50 percent since its last offering in 1999, the government is alluring the investors with inducements like a discount and free shares. In the share sale, dubbed T3, investors get a dividend yield of 14 %, which is more than triple the 3.8 percent return of the Australian benchmark index, the S&P/ASX 200.

According to the Government, investors will be able to pay in two installments, with retail investors paying A$2.00 per share in a first installment, a A$0.10 discount to the first part price for institutional investors. The investment will draw 14% in the first 12 months, based on a forecast A$0.28 a share total dividend for the year to June 2007.

A second and final installment, which will be priced Nov. 20, will be payable in 18 months.

The government is offering 2.15 bln shares plus an over-allocation option with the remaining portion of its 51.8 pct stake to be transferred to a separate investment fund established to cover public service pension payments. The shares will remain in the fund for two years, after which they can be sold.

Telstra shares rose to $0.4 to $3.63 Friday, paring the stock's decline this year to 7.6 %.
At the same time, finance experts predicted that Telstra would become the next big local company to join the takeover spree, once the Government's controlling stake is eliminated.
Meanwhile, Japanese retail investors had took over T3 shares worth $435 million as part of the Japanese Public Offer Without Listing (POWL), the federal Government said today.

A POWL is a type of sale unusual to Japan that lets retail investors to buy stock without requiring a separate listing in Japan. Minchin said Japanese retail investors have been allocated a minimum of 120 million Telstra shares through the POWL offer.

"At Friday's closing price this equates to around $435 million in shares and is in addition to the approximately $4 billion in shares taken by Australian brokers and financial planners on behalf of their retail clients announced yesterday," Mr Minchin said.

"This is another pleasing indication of the level of interest by the investing community in T3 and indicates that on the first day of the retail offer opening we have sold another significant parcel of shares to the retail market, prior to the institutional offer."