Governing lawmakers agreed yesterday to approve Australia's biggest-ever privatization, endorsing a multibillion-dollar plan to ensure that rural customers aren't stuck with poor service when former phone monopoly Telstra Corp is sold off, the prime minister announced.
Prime Minister John Howard's Cabinet gave the A$3.1 billion (US$2.4 billion) funding package its blessing at a meeting on Tuesday night, paving the way for the sale of the government's 51.8 percent stake in Telstra, which is expected to raise about A$30 billion.
Howard said the rest of the lawmakers in his governing coalition agreed to back the plan at a meeting yesterday.
Legislation to sell the government's stake will be presented in two weeks to parliament, where it faces heavy opposition from other parties who are worried that privatizing Telstra will cause service in rural areas, where there is less competition, to suffer.
Public opposition is also strong. A poll by the respected Newspoll agency published in the Australian newspaper on Tuesday found that 70 percent of respondents oppose the sale of the government's controlling stake in Telstra.
One rural-based lawmaker, Senator Barnaby Joyce, a newly elected senator for the coalition government's junior partner, the Nationals, had threatened to block the sale, unless standards for rural phone and Internet services are improved.
But following the Cabinet's decision on the funding plan, Joyce said he had achieved everything he had sought in negotiations with government ministers.
With the backing of all lawmakers in the ruling coalition, the legislation is guaranteed to become law because Howard has majorities in both houses of Parliament.
"The decision that we've taken today will, I believe, reflect a fundamental reality and that is, that it is quite counterproductive and not in the national interest for the Australian government to own more than half of the largest company in Australia," Howard told reporters.
The funding package includes A$1.1 billion to roll out improved Internet and cell phone services in rural areas over four years.
It also includes a A$2 billion trust fund that will ensure money is available to bolster standards of services outside cities in the future.
American Sol Trujillo earlier this year took over as the company's chief executive.
Howard said the government's 6 billion shares were expected to sold next year, although the precise timing had not yet been decided.
Telstra shares have slumped since the last tranche of government-owned stock was offloaded at A$7.40 apiece in 1999. The stock dropped A$0.01 to A$4.85 yesterday afternoon shortly after Howard's announcement.
Treasurer Peter Costello, the ranking finance minister, refused to commit the government to waiting until the price rebounded to the A$5.25 a share that the government had expected earlier this year to make from the sale.