Cheeky Telstra letters with 2000 board tilt

The seemingly permanent half-pregnancy of Telstra raises two quite separate sets of absolutely fundamental issues which can no longer be ignored or assumed away.

So far, the discussion about Telstra has been one-dimensional and almost infantile: should we or should we not sell the remaining 50.1 per cent still in government hands.

The positions of the Liberals and the Democrats are at least clear-cut. The Liberals want to sell – and many of them, individually, want to buy – while the Democrats resolutely don't.

In contrast, the Nationals and Labor have quite idiosyncratic, and exquisitely inverse, perverse positions. The Nationals in their hearts don't want to sell, harbouring an almost theological belief that some smidgin of public ownership will keep the subsidised telecommunications spaghetti spiralling out into the bush.

They complain bitterly at how a fully and then partly owned Telstra has let the bush down but believe public ownership is the necessary pre-condition to future service.

Yet, they are – mostly – prepared to endorse the full sale policy, individually and collectively lining up to go silently to the political guillotine for the sake of Coalition unity. Just like their party colleagues in Victoria under Chairman Great Leader Jeff.

Labor, in contrast, knows the rest of Telstra has to be sold, but is prepared to defend to the death continued – partial – ownership. Until of course, as with the GST, they get into office. Their silent hope is that somehow it gets sold before then, over their fervent principled opposition.

In practice, this all adds up to a reality that Telstra is going to remain half-privatised and so, half-pregnant, into the foreseeable future. Or, after the events in America this week, perhaps that should be: well beyond the foreseeable future.

This raises two major issues: the lesser of which will be brought into sharp focus when Peter Costello reveals the mid-year budget update next week. And which shadow finance minister Lindsay Tanner zeroed in on during the week.

Since 1998, all the budget figures have been prepared on the basis that the rest of Telstra would be sold. That, as a consequence, federal debt would be all but eliminated by 2001-02 – and that obviously, yearly debt interest payments would fall sharply.

Tanner made two main points. First, that the 2000 budget – and its forward projections – assume that with the sale of the rest of Telstra, interest payments would fall further than dividends that would otherwise have come from Telstra.

Absent such a sale, the budget surplus would thus be smaller than projected. How much smaller? Adding the other factors impacting on the surplus – which the PM has highlighted to justify welching on his petrol tax promise – perhaps sharply smaller.

Now Tanner's analysis might be more than a touch wonky. The sale of the rest of Telstra would impact on next year's budget, and even more in 2002-03. And it's entirely possible the gains to the surplus from GST – and petrol tax – windfall are going to swamp any reduction factors.

But his basic point is unarguable: the Government must stop printing a fiscal lie. That unless and until it becomes quite clear that the rest of Telstra will be sold, the budget should assume a continuation of the half-pregnant status quo.

A disappearing surplus might provide some fiscal justification for their welching on the petrol promise, and also keep spending claims from a desperately nervous backbench at bay.

But it would also undermine their fiscal credibility and – according to the PM – threaten higher interest rates. And incidentally, make it difficult to proceed with their plan to buy our votes in next year's election.

The second, and more important, issue is what the Government does with its voting control over 50.1 per cent of Telstra's shares. More specifically, how it decides what it does, and its obligation to tell us – the real owners.

This highlights the arguably unresolvable dilemma which shows why half-privatisation is untenable. On the one hand, the Government should exercise control for us – the real owners – but, on the other, it would be totally unacceptable for Communications Minister Dick Alston or the PM to behave like Kerry Packer or Rupert Murdoch. Or Jonathan Shier with money.

This comes into focus next week at Telstra's annual meeting when there are nine candidates for five Telstra board seats. Or – crucially – is that only four seats?

Retiring director – deputy-chairman John Ralph – is standing for re-election and three new candidates – Sam Chisholm, Catherine Livingstone and John Fletcher – selected by the Telstra board to replace three departed directors. Plus five independents led by entrepreneurial agitator Stephen Mayne.

Ralph and the three board-selected candidates are presumably going to get the Government's – our – vote and will win. They were only ``selected'' after their names had been passed by Dick and John for their acceptability.

That leaves the other five battling over the last position. Except, if the Government votes against all of them – then only four seats will be filled.

Mayne has rather cheekily written to Howard welcoming the Government's agreement to ``create a vacancy for one of the five external candidates ...''

And even more cheekily, seeking to have the Government vote for him. But preferably, having it abstain so that the 1.8 million minority shareholders could get to pick one board member.

The two key points are amplified by Mayne's cheek: the Government must decide if and how it will exercise its voting power. And it must tell us how and what it has decided. And why.

Copyright © 2024 The Mayne Report. All rights reserved

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