The government introduced legislation to parliament yesterday to sell its stake in Australia's former state telecommunications monopoly, Telstra Corp, but the privatization was under a cloud amid a plunging stock price and war of words between Telstra executives and government authorities.
Prime Minister John Howard yesterday insisted he was "very happy to work with" Telstra's new American chief executive Sol Trujillo, whose leadership team the prime minister branded "disgraceful" on Tuesday.
"There's no doubt in my mind that the long term position of Telstra is very strong and very good," Howard told a Sydney radio station.
Telstra stocks have plunged since Monday after Trujillo released to the stock market a profit warning that earnings for the fiscal year ending June 30, next year could be down 10 percent due, in part, to government regulations designed to protect Telstra customers' interests and keep opposition telco players competitive against the telecommunications giant.
Since the beginning of this month, the price has tumbled from A$4.68 (US$3.59) to A$4.34, wiping billions of dollars off Telstra's market capitalization.
The government earlier has said it wants to sell its 51.8 percent stake late next year, but that date now is in doubt because of the falling share price.
Howard said yesterday that Canberra would sell its shares only when "the price is right."
The opposition Labor Party on Tuesday released what it claimed was a secret Telstra document that showed the company had used money from its reserves to pay dividends to shareholders and had underinvested in its network.
Labor demanded an investigation into why Telstra's top executives presented the document, which could affect the company's share price, to Howard and senior ministers at a meeting on Aug. 11 but not to other shareholders.
At the Aug. 11 meeting, Telstra officials unsuccessfully pitched a A$5 billion government-funded plan to improve telecommunications infrastructure in regional areas.
Australia's corporate watchdog, the Australian Securities and Investments Commission, announced on Tuesday it was investigating Monday's Telstra profit warning to see if it breached stock market rules.
Howard said it had not been the government's duty to inform shareholders of the information disclosed to his ministers on Aug. 11.
"It just really highlights the absurd complication and conflict of the government simultaneously being a regulator, a source of funds and also the majority shareholder and that is why for a long time in the interests of Telstra we have wanted to sell our majority ownership," he said.