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Wed, Aug 16, 2006 - Page 10 News List

Canberra may abandon Telstra sale


The government will not be forced to sell its remaining 51.8 percent stake in Telstra Corp, Australia's dominant telecommunications company, a minister said yesterday.

"If the conditions don't suit then we've indicated that the government's Future Fund ... would be a very suitable vehicle to hold that shareholding," Treasurer Peter Costello told a media briefing in Canberra, referring to a fund to finance future federal debts including civil servants pensions.

Telstra shares have dropped 4.7 percent since last Wednesday, the day before the Melbourne-based company released its full year results that showed a 26 percent fall in profit.

The stock last traded at A$3.62 (US$2.75), less than half the A$7.40 price at which the government sold its last tranche of Telstra shares in 1999.

Various government leaders have indicated a decision on whether to proceed with the full privatization of Telstra will be made within weeks.

"We will deal with the government's shareholding at a time which is in the interests of other shareholders and the Australian taxpayers," Costello said.

"We are not a forced seller; we are not selling this to get the money, we don't need the money," he said.

The government's plan to sell its remaining Telstra stake, a process known as T3, has been dealt a series of blows in the last week.

As well as Telstra's disappointing profit result, the company has warned it may cut its earnings guidance after an unfavorable ruling from the regulator on what it can charge its competitors for access to its network.

"My message to anybody, whether they're in the company or elsewhere, is if they think that the government is over a barrel here, they're wrong," Costello said.

The government managed to pass legislation to privatize the telco through the Senate by a narrow margin last September.

The sale was then expected to make A$30 billion in Australia's largest ever privatization.

The center-right coalition government's window to make the sale would close if the center-left Labor Party opposition wins elections due late next year.

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