Telstra sell-down prompts Future Fund change: Tanner

James Riley
Wednesday, 25 November 2009 09:25

IT Policy - Government Tech Policy

Finance Minister Lindsay Tanner has dealt the Federal Government out of all commercial investment decisions made by the $85.6 billion Future Fund as a result of a $2.4 billion sell-down of Telstra shares last August that caused protests from shareholder groups.

And he made clear Government would stay out of any Future Fund board decision related to its Telstra shareholding and any company vote that might occur regarding its possible structural separation.

The Future Fund remains Telstra's largest shareholder with about 10 per cent of its equity.

The Future Fund, chaired former Commonwealth Bank boss David Murray, sold a huge tranche of Telstra shares just weeks before Communications Minister Stephen Conroy unveiled regulatory reforms that, among other things, sought the separation of Telstra's wholesale and retail businesses.

Shareholders cried foul, the suggestion being that the Commonwealth Future Fund must have been given an inside run on the details of Government plans.

Mr Tanner used a National Press Club address in Canberra to formally excise Government input into any and all commercial investment decisions related to money held by the fund.

The complication was an unforeseen consequence of the Howard Government decision to transfer the 17 per cent of Telstra shares still held by the Federal Government into the fund.

The previous Government issued a Ministerial Direction dictating that the shares be held in escrow until November 2008 (Government had been concerned that potential investors would be scared off by concern that the Commonwealth could flood the market with shares, driving down the price)

Subsequently, the Future Fund made its first big sell down in August this year, creating a moment of considerable awkwardness at a pivotal moment in Telstra's shareprice history – awkward for the Government, for the Future Fund, for Telstra and its shareholders.

"The Australian Government had no involvement in this (Future Fund) decision," Mr Tanner said. "Nor did the Future Fund have any prior access to or knowledge of Government plans in relation to Telstra or the national broadband network."

"The Government's negotiations with Telstra on structural separation mean that the Future Fund's activities must be absolutely independent of the Government."

"The existence of a power of ministerial direction regarding the Future Fund's Telstra shares casts doubt over this independence."

Mr Tanner said the importance of the Future Fund's operational independence was crucial in the context of the Government negotiations with Telstra over its regulatory and broadband issues.

"I want to make it absolutely clear that the Government will not be directing the Board in relation to its Telstra shareholdings as is allowed under the Future Fund Act, including the exercising of its voting rights in relation to any shareholder vote on structural separation," Mr Tanner said.

"Nor will the Government discuss with the Board its intentions in relation to the use of its voting rights. The Future Fund will make its decisions with only one issue in mind: shareholder value."