Telstra Hopes For Mercy From 'mum And Dad' Investors

The Age

Tuesday May 30, 2006

JESSE HOGAN, TELECOMMUNICATIONS REPORTER and KATHARINE MURPHY

MUMS and dads will be invited to "share in the future" and forget the money they lost in the last Telstra float under a slick advertising campaign being put together to promote the looming T3 privatisation.

The Age believes that small groups have been shown the Federal Government's T3 advertising campaign in confidential market-research briefings in Sydney and Melbourne over the past month.

The campaign is being built around the slogan "The final Telstra share offer - share in the future".

As with the past two Telstra floats, retail investors would pay half-price for their T3 shares up-front, but receive a full dividend.

The advertising campaign is intended to run in three stages: an initial information campaign, a second push to sell the benefits of the sale to retail investors, and a "last chance" campaign in the weeks before the deadline.

Government advisers are working on a scenario in which prospective investors would be asked to register for a T3 prospectus by August 20 this year, with an investment deadline of October 8.

The market research underpinning the advertising campaign is being conducted by Melbourne-based DBM Consultants, which was involved in the first and second Telstra share offers. It also conducted polling on the Government's behalf in June last year to gauge enthusiasm for a final Telstra share offer.

Government sources last night stressed that the ideas being put to the focus groups were options only. When and how the Government will sell its remaining stake in Telstra is undecided. Federal cabinet is expected to take the final decision within the next month.

Finance Minister Nick Minchin has signalled he would like to be able to sell Telstra in October or November.

The Government's T3 spokesman, Ian Smith, told The Age last night that no final decisions had been taken. "The advisers continue to canvas a broad range of options in relation to a potential retail offer of the Government's remaining shareholding in Telstra," Mr Smith said.

"Any campaign is subject to the Government's final decision to proceed with T3."

The first Telstra sale in 1997 valued the shares at $3.30 for retail investors. The price more than doubled to $7.40 during the T2 sale in 1999.

The value of the Government's remaining share of Telstra has plunged in the past year from more than $30 billion to under $25 billion, with the company's management in open conflict with both the competition regulator and the Federal Government over the rules governing the industry.

The Government does not need to sell all its stake in Telstra to either the public or institutional investors if there is insufficient market demand, as it has the option of transferring some of its 51.8 per cent stake to the Future Fund.

Building support among ordinary investors will be key to the success of the float, which remains fraught because of community opposition to the sale and that people lost money in T2. Telstra shares fell 2? yesterday to $3.76, extending the fall this year to 4.3 per cent.

© 2006 The Age

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