Telstra Tanks: Shareholders smell a Future Fund rat

James Riley
Tuesday, 15 September 2009 13:18

IT Industry - Market

Finance Minister Lindsay Tanner has rejected suggestions that the sell-down of Telstra shares by the Future Fund three weeks ago was in anticipation of the government’s announcement today of telecommunications regulatory reform.

Still, Australian Shareholders Association chief executive Stuart Wilson says the timing of the sell-off was simply curious – and he is sure that the market regulators will investigate the matter.

"It is curious timing, (and) I certainly think it is worthwhile that the regulator has a close look at it," Australian Shareholders Association chief executive Stuart Wilson told iTWire.

"The law says that you cannot trade whilst you are in possession of inside knowledge," he said.

"There is no indication whatsoever that the Future Fund had any inside knowledge, however, it would be worthwhile for the regulator to make sure that would indeed be the case."

The curious timing, according to the ASA, is in the Future Fund’s decision to sell 34% of its Telstra holding on August 20. The Future Fund sold the parcel at $3.47, while the Telstra shares closed on August 20 at $3.61.

Telstra shares closed at about $3.11 today, down from $3.25 yesterday after Communications Minister Stephen Conroy announced sweeping regulatory changes that some shareholders see as detrimental to Telstra’s prospects.

Finance Minister Lindsay Tanner flatly rejected any suggestion the timing of the sell-down was curious – saying the Future Fund had made clear its intentions long ago.

"Allegations that the Future Fund were given advance notice of the Government's regulatory package announced this morning are completely untrue," Mr Tanner said.

"The Future Fund always planned to sell down its holding in Telstra, following the end of the escrow period on 20 November 2008, in an orderly manner over the medium term and to build a portfolio consistent with its long term mandate and strategy."

"The Future Fund Board is independent from Government and is responsible for making specific decisions on investments. It is entitled to take whatever steps it regards as appropriate to protect the investment it manages on behalf of Australian taxpayers," he said.

The Future Fund said on August 20 the sale had reduced its holding in Telstra from 16.4% of the company to 10.9%.

"The Board took the view that current market conditions were conducive to a partial
sell-down of the holding," it said in a statement at the time. It also committed to at that time to not sell any additional Telstra shares for 180 days.

For all the talk of regulatory reform providing opportunities for Telstra in that it will create a larger market, there seemed little joy among shareholder.

At $3.11, the Telstra share price is now starting to plumb the depths of the worst period in its history that occurred during the regulatory stand-off between then CEO Sol Trujillo and former communications minister Helen Coonan.

Shareholder’s association chief Stuart Wilson says there "is not one good thing for Telstra" in the regulatory proposals and highlights the plight of mum and dad investors who bought Telstra shares from the Government "in good faith."

While the association had not written to regulators asking them to look at the timing of the Future Fund sell-down, Wilson is confident they are already investigating.

"Knowing the way that the ASX and ASIC operate, I am sure that they would already identified it as a situation where there was some curious timing," he told iTWire.