MELBOURNE -(Dow Jones)- One of Australia's biggest listed fund managers
Monday said it is concerned about the Australian government's calls for
Telstra Corp. (TLS.AU) to either voluntarily split its retail and network
assets or face tougher regulations and limited growth options.
Adding its voice to a growing chorus of investors, Australian Foundation
Investment Co. (AFI.AU) said Telstra is entitled to get fair value for its
assets, and the moves highlight a danger of "coercive government
Last month, the Australian government outlined planned changes to
legislation governing Telstra - the nation's biggest telecommunications
company - which it said would boost competition ahead of the rollout of its
proposed A$43 billion national broadband network. It does not plan to pay
compensation to Telstra if the company chooses to split its operations.
Telstra, which owns most of Australia's fixed line assets infrastructure,
has said it is disappointed with the government's moves and continues to
talk to Canberra about options.
"Any (company) agreement with the government needs to be in the interest of
shareholders," AFIC said.
AFIC, which holds Telstra shares, questioned whether separation of network
and retail assets has worked anywhere else in the world.
The group also said the government's actions raise questions of sovereign
risk for overseas investors in Australian assets.
AFIC's comments come as the Australian Financial Review reported Monday that
the Telstra board could consider putting any deal it strikes with the
government on splitting its businesses to a shareholder vote, which could
expose Canberra, and its planned national broadband network, to investor
The report said Melbourne-based Telstra is facing mounting calls from
institutional shareholders not to accept any deal with Canberra that does
not fairly compensate the company for assets under a split.
Depending on the structure of any deal, a vote could be legally required
but, without citing sources, the report said some members of Telstra's board
believe Telstra's 1.4 million shareholders should be able to vote either
The government, which plans to bar Telstra from buying more valuable
wireless spectrum unless it gives an undertaking to voluntarily split its
businesses, wants an agreement by the end of the year.
Fund mangers Investors Mutual, Tyndall Investments, Maple-Brown Abbott, 452
Capital and Cannae Capital Partners have been vocal in their opposition to
the government's plans, and the report said they plan to seek a meeting with
Communications Minister Stephen Conroy as part of a lobbying campaign.
AFIC said Monday that shareholders should make their views known to their
A Telstra spokesman declined to comment.