INFORMATION, ANALYSIS AND ADVICE FOR THE PARLIAMENT INFORMATION AND RESEARCH SERVICES

Chronology No. 3 2003–04

Telstra Sale: Background and Chronology

This chronology outlines the history of the Telstra privatisation process. It documents some of the key dates and policy processes associated with the first and second tranche sales of Telstra. It also outlines some of the key inquiries and legislative conditions required for each stage of the sale.

Grahame O'Leary Economics, Commerce and Industrial Relations Group 15 September 2003

DEPARTMENT OF THE PARLIAMENTARY LIBRARY ISSN 1442-1992

 Copyright Commonwealth of Australia 2003

Except to the extent of the uses permitted under the Copyright Act 1968, no part of this publication may be reproduced or transmitted in any form or by any means including information storage and retrieval systems, without the prior written consent of the Department of the Parliamentary Library, other than by Senators and Members of the Australian Parliament in the course of their official duties.

This paper has been prepared for general distribution to Senators and Members of the Australian Parliament. While great care is taken to ensure that the paper is accurate and balanced, the paper is written using information publicly available at the time of production. The views expressed are those of the author and should not be attributed to the Information and Research Services (IRS). Advice on legislation or legal policy issues contained in this paper is provided for use in parliamentary debate and for related parliamentary purposes. This paper is not professional legal opinion. Readers are reminded that the paper is not an official parliamentary or Australian Government document. IRS staff are available to discuss the paper's contents with Senators and Members and their staff but not with members of the public.

Acknowledgements

I would like to thank Dr June Verrier, John Kain, Dr Matthew Phillips, Brendan Bailey and Indra Kuruppu for comments and assistance.

Enquiries

Information and Research Services publications are available on the ParlInfo database. On the Internet the Department of the Parliamentary Library can be found at: http://www.aph.gov.au/library/ IRS Publications Office Telephone: (02) 6277 2778 Published by the Information and Research Services, Department of the Parliamentary Library, 2003.

Contents

Introduction ...... 1 Background ...... 2 First Tranche Sale –—T1 (September to October 1997) ...... 5 Second Tranche Sale —T2 (September to October 1999) ...... 7 Proceeds of the T1 and T2 sales ...... 9 Towards a Possible Third Tranche Sale of Telstra...... 13 Conclusion ...... 16 Appendix A: Government's Response to Telecommunications Service Inquiry (TSI) . . . 17 Appendix B: Government's Response to the Regional Telecommunications Inquiry . . . 19 Appendix C: Chronology ...... 21 Endnotes ...... 38

List of Tables

Table 1: Networking the Nation—T1 allocation to states and territories...... 10 Table 2: Social Bonus disbursement from T2 ...... 12 Table 3: Summary of disbursement of proceeds from T1 and T2 ...... 13 Table 4: Summary of major telecommunications funding initiatives since the T2 sale...... 15

Telstra Sale: Background and Chronology

Introduction

The sale of Telecom/Telstra1 has been an issue of public policy debate for well over a decade. It was talked about in the late 1980s and early 1990s as the Hawke Labor Government implemented a microeconomic reform agenda that included the privatisation of a number of Commonwealth assets including AUSSAT, the Commonwealth Bank, Australian Airlines, the Commonwealth airports, the Commonwealth Serum Laboratories (CSL) and Qantas. Labor generally opposed any sell-off of Telstra, but did consider the splitting of Telstra on a number of occasions. The Liberal-National Party Coalition, on the other hand, embraced the idea of selling all of Telstra (although the National Party's support has been less clear cut). The minor parties in the Senate, the Democrats and the Greens, have consistently opposed the privatisation of Telstra. More recently, a number of independent members in the House of Representatives, such as Peter Andren, Tony Windsor and Bob Katter (all of whom have rural based electorates) have been staunch opponents of any further sale.

Then Opposition Leader, John Hewson, campaigned on a platform to sell Telecom in a series of tranches in the 1993 election2. John Howard endorsed a partial privatisation of Telstra as a central plank of the Coalition's 'communications policy' in the 1996 election.3 After it won that election, the Howard Government moved almost immediately to sell one- third of Telstra, introducing legislation—the Telstra (Dilution of Public Ownership) Bill 1996—for the sale in May of 1996. The sale Bill passed the Senate in December that year.

Following what was considered a highly successful first tranche float, the Howard Government moved quickly to introduce legislation—the Telstra (Transition to Full Private Ownership) Bill 1998— to fully privatise Telstra. However, early attempts to get support for a full sale failed when independent Senators Brian Harradine and Mal Colston did not support the Bill. The Howard Government had to settle for selling off a further 16 per cent, enabling it to privatise almost half of Telstra with the Government maintaining a majority shareholding (50.1 per cent). The second tranche sale was also subject to a funding package to improve telecommunications services—the social bonus initiatives.

The second tranche sale legislation precluded any further sell down below 50.1 per cent unless an independent inquiry certified that Telstra had met prescribed criteria relating to its operational performance, after which the provisions of the Bill which facilitate the further sale of shares in Telstra would commence. The inquiry, known subsequently as the Telecommunications Service (or Besley) Inquiry (TSI), found that some problems existed in rural and regional areas with regard to: the timeliness of installation, repair and reliability of basic telephone services; mobile phone coverage and pricing; and reliable access to the internet. The Government announced a series of initiatives (totalling $163.1 million) in response to the recommendations of the TSI in May 2001.

1 Telstra Sale: Background and Chronology

The Coalition's election platform in the November 2001 federal election included a commitment that there would be no further sale of Telstra until telecommunications services in rural and regional Australia were adequate.4 In August 2002, almost a year after the 2001 election and amidst further debate as to the adequacy of regional telecommunications services, the Government announced a further inquiry into regional telecommunications services—the Regional Telecommunications (or Estens) Inquiry (RTI). The RTI was also required to evaluate the Government's response to the recommendations of the TSI and to suggest ways to future proof regional telecommunications service standards. The inquiry gave general support to the Government's TSI initiatives, suggested that telecommunications service standards were generally adequate and provided recommendations on ensuring the future standard of telecommunications services.

On 25 June 2003 the Government released its response to the RTI. Having resolved much of its internal arguments over a further Telstra sale (particularly with some National Party backbenchers), the Government introduced legislation—Telstra (Transition to Full Private Ownership) Bill 2003—for the full privatisation of Telstra the next day. Background

The Commonwealth assumed responsibility for communications services in Australia upon Federation in 1901. The Overseas Telecommunications Commission (OTC) was established in 1946 to manage international telecommunications. Until 1975 responsibility for internal (domestic) telecommunications services rested with the Postmaster General's Department. The Telecommunications Act 1975 separated telecommunications from postal functions through the establishment of two separate statutory authorities—the Australian Postal Commission and the Australian Telecommunications Commission (Telecom). Telecom was given monopoly control over the telephone network infrastructure and associated services. It was set up as the monopoly provider of domestic telecommunications services with exclusive rights to supply, install, maintain, repair and operate the basic telecommunications services in the national network. Telecom was also the technical regulator of customer service equipment, private telecommunications networks and value-added services. Private interests were limited to localised telephony networks essentially based within the confines of private organizations (for example, PABX systems).

However the rapid advance of telecommunications technology and the services it could provide to business challenged the role of the public provision of telecommunications infrastructure. Two reports in the 1980s, the Davidson Inquiry5 (a Committee of Inquiry into Telecommunications Services) and the Myers Report6 (a Committee of Inquiry into Technological Change) concluded that rapid technological change and increasing competition in the services sector was inevitable. The argument that telecommunications was a natural monopoly and needed to be retained in public ownership attracted increasing

2 Telstra Sale: Background and Chronology

academic criticism. As well, Telecom's monopoly position and potential conflict with the Trade Practices Act 1974 was being questioned.7

Telecom's public monopoly position faced increasing pressure from two fronts. First, the rapid changes in technology and the need for new investment would place increased pressure on the Government to fund such investment. Second, the expansion of telecommunication services bought pressure from business groups to relax Telecom's monopoly in order to create opportunities for private interests.

The Davidson inquiry noted that Telecom's independence was circumscribed by a 'web of government controls, policy interventions and constraints' and that the next step was to make Telecom a company incorporated under the relevant companies' legislation.8 However, whilst the inquiry recommended that the Australian Telecommunications Commission be abolished and replaced by an incorporated company, it recommended that such a company be 100 per cent owned by the Commonwealth Government.9 It also recommended against selling off parts of Telecom to private interests.10

During the late 1980s the privatisation of Telecom was largely off the public agenda, the Davidson inquiry having specifically recommended that Telecom remain in public ownership and Labor having an ideological disposition against any privatisation of the national telecommunications carrier. Public policy instead focused more on market structure than ownership issues of the incumbent monopolist. However, the microeconomic reform process of the Hawke-Keating years had placed increasing pressure on policy change within the ALP. Privatisation of the Commonwealth Bank and other infrastructure asset sales in this period led to increased speculation about the privatisation of Telecom. The privatisation issue was raised in a taskforce set up by former communications Minister Gareth Evans in 1987–88. The task force was commissioned, amongst other things, to look at the potential role of the private sector in the traditional monopoly areas covered by Telecom, OTC and AUSSAT.11

The 1988 policy statement Australian Telecommunications Services: A New Framework12 outlined the Labor Government's shift to free up the telecommunications market. The Government announced wide ranging plans that would open up the telecommunications market to increased competition in the 1990s. The main changes included:

• continuing authority for the existing carriers to be the sole providers of basic network facilities and services, subject to greater commercial and external regulatory discipline

• full scope for competition in the provision and operation of value added services

• increased scope for competition in the provision and maintenance of network terminal equipment for connection within customers' premises, in particular in relation to PABX maintenance and small business systems, and

3 Telstra Sale: Background and Chronology

• establishment of regulatory arrangements that are independent of the carriers and directed towards ensuring maintenance of minimum necessary standards, fair and efficient competition beyond the monopoly boundaries, and improved efficiency and accountability for the monopoly carriers.

Then Leader of the Opposition, John Howard, was critical that the measures did not go far enough and argued that Telecom should be privatised:

… changes to the monopoly powers of Telecom Australia have long been advocated. It is clear, however, that the measures announced by the Government do not go nearly far enough … Labor has adopted our policy, and we welcome that, in its decision to convert Telecom to a public corporation. This will give Telecom a more commercial orientation and free it of bureaucratic controls which impede decision making and flexibility ... The Liberal and National parties, unlike the Government, which is in total disarray on this issue, have a clear and comprehensive policy on privatisation. We believe that government business enterprises that tie up taxpayers' money in activities that the private sector can perform better should be privatised. 13

In late 1988–89 regulatory control of telecommunications was separated from Telecom by the creation of an independent regulator AUSTEL. Telecom's position as a monopoly domestic telecommunications supplier was maintained in the short-term. AUSSAT (the government owned satellite operator) and OTC remained intact but would be subject to review in 1990. At the time, the Government considered two models: one in which Telecom and OTC would be kept separate; the other merged Telecom and OTC and sold off the AUSSAT satellite communication network to new market entrant, Optus Communication (who would provide competition to Telecom in local network infrastructure provision).

John Hewson (then Shadow Treasurer) and Richard Alston (Shadow Minister for Communications) supported the privatisation of Telecom before the 1990 federal election14. In contrast, Labor continued to oppose any privatisation of Telecom. It has been noted that even at the special Labor Party conference on privatisation in 1990 the privatisation of Telecom was not an issue.15

The Telecommunications Act 1991 contained provisions for the merger of Telecom and OTC into a single publicly owned carrier, the Australian and Overseas Telecommunications Corporation (AOTC). The Act also contained measures to open up some of the telecommunications market to limited competition, enabling Optus to compete with Telecom in the domestic market for a duopoly period (1992–1997) and a mobile network triopoly between Telecom, Optus and Vodafone (also from 1992–1997), with full competition planned after 1997. The main aim of the transition arrangements was to provide a stable interim market in which the industry could restructure and to allow competition to provide efficiency in service provision and pass on benefits to consumers.

The Coalition campaigned in the 1993 election on a platform that included the privatization of Telecom. Proceeds from a Telecom sale would fund the measures

4 Telstra Sale: Background and Chronology

contained in the Coalition's "Fightback II" policy. Labor opposition to the sell off of Telecom continued. Communications Minister Bob Collins reflecting on Labor's privatisation record noted:

… I don't believe that we have eroded the situation in terms of privatisation. We've had a carefully managed approach to what we are selling, and we've always drawn the line at Telecom.16

In the end, political debate on the privatisation of Telstra during the 1993 election was overwhelmingly subsumed by debate over the GST issue.

While Labor's opposition to selling Telstra was largely influenced by the union movement's anti-privatisation agenda, Prime Minister Paul Keating took a somewhat broader view on the possible privatisation of Telstra. He is reported to have considered selling off Telstra's directories business (Yellow Pages) and its fledgling mobile division (MobileNet) in 1995.17 He also considered the ownership issue less important than getting the market structure right:

… as a general policy, what we've done is set up a competitive environment for Telecom. We've established a second carrier, Optus, who has now made substantial market inroads, and one of the things we're going to be doing over the next six months to 12 months is looking at the future of telecommunications policy and where we go after 1997 in terms of opening up. So that's the model. The ownership of Telecom, therefore, isn't especially important other than that it's subject to the competitive disciplines of that particular competitive marketplace.18

John Howard had largely championed the full privatisation of Telstra but by the time of the release of the Coalition's communications policy in January 1996 the Opposition's policy line was for a partial sale only. This included that in its first term it would sell no more than a third of Telstra (of which no more than 35 per cent could be owned by foreigners). The remaining two-thirds of Telstra were to remain in public ownership. Any further sale would be considered towards the end of a Howard Government first term when it would formulate a proposal for the further sell-off of the Commonwealth's remaining shareholding in Telstra and seek a specific mandate on that proposal at the then forthcoming election.19 First Tranche Sale –—T1 (September to October 1997)

The Coalition's 1996 election policy20 contained a commitment to partially privatise Telstra. The major features of the policy were:

• one-third of the Commonwealth's equity to be made available through a share float, 65 per cent of which would be reserved for Australian investors, and

• foreign investors only to be allowed to subscribe to 35 per cent of the float and no foreign investor to be allowed to acquire more than five per cent of the one-third float.

5 Telstra Sale: Background and Chronology

The Government introduced the Telstra (Dilution of Public Ownership) Bill 1996 on 2 May 1996. The Bill was sent to the Senate Environment, Recreation, Communications and the Arts References Committee for inquiry. The committee's report Telstra: To Sell or not to Sell? was tabled in Parliament on 9 September 1996. The report recommended that Telstra remain in full public ownership noting that privatisation was unpopular and that the inquiry found no empirical evidence that Australia would benefit from the privatisation of Telstra.21 A government Senators' Report prepared by Coalition Senators rejected the majority report and recommended that the Bill, allowing the further sale of Telstra be passed. The Bill passed its third reading on 11 December 1996.

The Telstra share offer opened on 15 October 1997. By the close of applications on 3 November 1997, 1.8 million Australians had applied for shares. Of the Telstra employees eligible to subscribe for shares under the Telstra employee share scheme, 92 per cent took up the offer. Shares were issued at $3.30 payable by two instalments: the first $1.95 ($2.00 for institutions) payable on application and the second $1.25 ($1.30 for institutions) payable in November 1998.

Telstra shares were first traded on the Australian stock exchange on 17 November 1997, opening at $2.60 with a high of $2.75 before closing at $2.67, a premium of 37 per cent.22 Of the one-third of shares which were sold, up to 35 per cent (11.67 per cent of all issued shares) could be purchased by foreign investors. At the end of 1997 the actual figure was 19.5 per cent (6.8 per cent of all issued shares).

A trust, Telstra Instalment Receipt Trustee Limited (TIRT),23 was established to hold Telstra shares until payment of the final T1 instalment. Holders of instalments receipts carried the same voting and dividend rights as fully paid shares. After payment of the second instalment, the holder of the instalment receipt was registered as the holder of the shares and the instalment receipt cancelled. TIRT also held shares on trust for the general public who purchased instalment receipts in the second tranche sale of Telstra shares in October 1999.

Instalment receipt holders made their final instalment payment and had the underlying shares transferred to them on 17 November 1998. Two dividends were paid between the time the shares first listed and the time the second instalment receipt was due—a $0.07 per share interim dividend on 26 February 1998 and a final dividend of $0.07 per share on 22 September 1998.

Telstra instalment receipts (issued at $1.95) rose from around $2.50 in December 1997 to be trading at $3.98 by March 1998. The instalment receipt price fluctuated around the $3.50 to $3.60 price range for much of the middle of 1998 and then jumped substantially to around $4.50 in August 1998 (Telstra announced a record $3 billion profit on 26 August).24 The fully paid T1 shares rose to over $9.00 by January 1999. The share price fluctuated during much of 1999 falling to under $7.50 during May, before recovering mid- year and slumping again in October of 1999, just prior to the T2 listing.

6 Telstra Sale: Background and Chronology

Second Tranche Sale —T2 (September to October 1999)

The Prime Minister announced the Government's decision to sell the remaining two-thirds of Telstra on 15 March 1998.25 Legislation to enable the further privatisation of Telstra was introduced swiftly following the successful float of T1. The Government introduced the Telstra (Transition to Full Private Ownership) Bill 1998 into the Parliament on 30 March 1998. Schedule 2 contained provisions which repealed the provisions in Division 2 of Part 2 of the Telstra Corporation Act which require the Commonwealth to retain two-thirds of the equity in Telstra. This repeal was not to take effect until after the first general election for the House of Representatives after 15 March 1998 (the date of the announcement of the Government's decision to sell the remaining Commonwealth interest in Telstra). The election was subsequently held on 3 October 1998.

The Bill made provision for the sale of the remaining two-thirds of Telstra in either one or a series of tranches within guidelines which were essentially the same as those laid down in the Telstra (Dilution of Public Ownership) Act 1996 and included:

• continuing restrictions on levels of foreign ownership. Total foreign equity was restricted to 35 per cent of shares on issue, with individual foreign ownership limited to 5 per cent

• Telstra to continue to base its operations in Australia, and

• retention of the current regulatory protections regarding untimed local calls, universal service obligations and customer service guarantees.

The Senate referred the Telstra (Transition to Full Private Ownership) Bill 1998 to the Environment, Recreation, Communications and the Arts Legislation Committee for inquiry and report on 1 April 1998. The committee's report (tabled on 26 May 1998) recommended that the Bill proceed subject to a number of recommendations including that a portion of the proceeds from the sale of the remaining two-thirds of the Telstra Corporation Ltd be used to upgrade the existing infrastructure in rural areas. The Government failed to secure Senate approval for the proposed sale process. Senators Harradine and Colston voted against the full privatisation.

Following the failure to get Senate approval for the proposed full sale, the Government announced (on 22 July 1998) a staged approach to the further sale of Telstra. The major points of the new policy included:

• introduction to Parliament of a new Telecommunications Bill bringing together customer service safeguards which are to apply irrespective of any further changes in Telstra's ownership

• the Government to sell the remainder of Telstra in stages. The first sale will be of 16 per cent, which will leave 51 per cent (and majority control) in government hands, and

7 Telstra Sale: Background and Chronology

• no further sale, beyond 49 per cent, until the Government has established an independent inquiry which will assess Telstra's service levels to customers in each of metropolitan, rural and remote areas against prescribed standards.

Prior to the October 1998 federal election the Government also committed itself to legislation to provide that there would be no further sell-down of the Commonwealth's shareholding in Telstra until an independent inquiry certified that Telstra's service levels are adequate.26 The Coalition was returned to office in the 1998 federal election.

The Government reintroduced the Bill on 12 November 1998 with amendments that allowed for a further sale of 16.6 per cent immediately and with a number of conditions on any further sale. The Telstra (Transition to Full Private Ownership) Bill 1998 included measures to:

• facilitate the sale of shares in Telstra so that the Commonwealth retained 50.1 per cent of the total number of shares, i.e. a sale of a further 16.6 per cent of Telstra shares

• set out the distribution of the Government's 'social bonus', which was to be funded by the sale, and

• make provision for the establishment of an independent inquiry into Telstra's service performance before the Commonwealth divests itself of more than 49.9 per cent of Telstra shares.

The Bill was subsequently referred by the Senate to the Environment, Communications, Information Technology and the Arts Legislation Committee on 2 December 1998. The Committee report supported the full privatisation of Telstra noting that there was no substantial opposition in submissions to the further privatisation of Telstra. Labor and the Democrats submitted dissenting reports.27 The Bill was passed in the Senate on 21 June 1999 with support from Senators Harradine and Colston.

The T2 sale opened on 21 September 1999 and closed on 7 October 1999. The Telstra share price had risen dramatically following the T1 float peaking at just over $9 in October/November 1998 but had declined to $7.78 (amidst a declining share market in both the US and Australia) at the close of trading in the week prior to the T2 listing.

T2 shares first listed on 18 October 1999. Retail investors paid $4.50 and institutional investors paid $4.75 for the first instalment. The second instalment was $2.90 for retail investors (giving a final price of $7.40) and $3.05 (giving a final price of $7.80) for institutional investors.

At the close of trading on the first day T2 instalment closed at $4.51 just above their issue price but at a discount of 24 cents to the institutional price. However, the decline in share price for Telstra ordinary shares (i.e., those sold in the T1 sale) was more dramatic, falling

8 Telstra Sale: Background and Chronology

41 cents to $7.37 by close of trading. It was speculated that the drop was a result of institutions dumping fully paid stock to buy instalment receipts.28

Instalment receipt holders made their final instalment payment and had the underlying shares transferred to them on 18 November 2000. Two dividends were paid between the time the shares first listed and the time the second instalment receipt—a $0.08 per share interim dividend on 28 April 1998 and a final dividend of $0.10 per share on 18 September 2000. The Telstra share price recovered briefly in November and December 1999 reaching a high of just over $9.00. The share price fluctuated (wildly at times) over the next three years but steadily declined to a low of just under $4.00 in March 2003 before recovering mid year to be just above $5.15 in early September 2003. Proceeds of the T1 and T2 sales

According to the Auditor-General,29 total proceeds of the initial T1 (first tranche) share offer were $14.240 billion.

• $1.150 billion of the proceeds was set aside for the Natural Heritage Trust

• $250 million for the Regional Telecommunications Infrastructure Fund, and

• the balance expected to contribute to a reduction in Commonwealth public debt.

A Networking the Nation (NTN) General Fund was established in 1997 following the T1 sale. Funding was allocated to the States and Territories as indicated in Table 1. This same fund later incorporated various parts of the Social Bonus package allocated to NTN following the sale of a further 16.6 per cent of Telstra (T2) in 1999.

Total proceeds of the T2 (second tranche) share offer were $16.0 billion. The T2 share offer comprised 2.13 billion shares representing some 16.6 per cent of the company. Although the number of shares sold in T2 was approximately half the number sold in T1, T2 is estimated to have raised $1.8 billion more than the initial sale.30

Further funding initiatives to assist the development of telecommunications infrastructure and services in regional, rural and remote Australia were established through the Social Bonus package (see below).

9 Telstra Sale: Background and Chronology

Table 1: Networking the Nation—T1 allocation to states and territories State $ million Australian Capital Territory 4 New South Wales 37.4 Victoria 28.5 Queensland 53.1 Western Australia 26.5 South Australia 26.5 Tasmania 58 Northern Territory 16 Total $250

The Social Bonus Initiatives (T2) In June 1999, the Commonwealth Government announced the $1 billion Accessing the Future package of Social Bonus programs, to be funded from the second sale of Telstra shares, with the objectives of:

• expanding access in regional, rural and remote Australia to improved telecommunications infrastructure and services

• assisting Australia's small and medium information technology and telecommunications firms and entrepreneurs create new business and employment opportunities

• provide better access for Australians to IT networks and to government services, and

• improving environmental protection through a further $250 million boost to the Natural Heritage Trust.

Breakdown of spending incorporated into Networking the Nation under the Social Bonus includes:

• funding to meet the telecommunications needs of remote island communities ($20 million over three years)

• Internet access (at least equivalent to untimed local call access) for people in all rural and regional/areas ($36 million over three years)

• continuous mobile phone coverage along designated major highways ($25 million over three years)

• Building Additional Rural Networks (BARN—$70 million), to support and develop innovative market models for regional communications service delivery

10 Telstra Sale: Background and Chronology

• Local Government Fund ($45 million), to support local government authorities to improve access to local government services online for their communities

• expanded mobile phone coverage in South Australia, Western Australia and Tasmania ($1 million per state), and

• Connecting Tasmanian schools ($15 million), to support the Tasmanian Government to put their schools online.

A further $295 million was be made available under the following Social Bonus programs which fall outside Networking the Nation, to support improvements in regional communications:

• access to untimed local calls for remote Australians living in extended zones ($150 million over three years)

• a Television Fund to extend SBS service and enable improved television reception in regional areas ($120 million over five years)

• the Launceston Broadband Project ($15 million) involving the establishment of a product development centre in Tasmania, together with a development fund for small businesses and a broadband network in Launceston linking up to 5000 customers, and

• Trials in Innovative Government Electronic Regional Services (TIGERS–$10 million), to trial a range of innovative means of delivering government services over the Internet, through call centres and over-the-counter facilities (supported electronically) with an emphasis on regional and remote areas.

In addition, $70 million was allocated to improve service delivery to small rural communities through the Rural Transaction Centres Program, to be administered through the Commonwealth Department of Transport and Regional Services.

There were two initiatives within the Social Bonus funding, which did not specifically target regional communities, but which the Government believed would provide broad benefits to the IT&T sector and users in Australia:

• Building IT Strengths (BITS—$158 million), a program designed to address current market failures and promote the growth of new and developing innovative Australian IT&T businesses, and

• NetAlert (formerly known as Netwatch—$3 million), involving a national community education program to promote 'safe' Internet content, together with R&D grants for the development of online content software.

Table 2 below provides a summary of the social bonus disbursement from the second tranche sale. Table 3 shows a summary of total disbursements from both sales.

11 Telstra Sale: Background and Chronology

Table 2: Social Bonus disbursement from T2

Programs $ million Communications related programs National Heritage Trust 250 n/a Additional 9.4 n/a Environmental spending Networking the Nation 214 • Remote island communities ($20 million over three years) • Internet access ($36 million over three years) • Continuous mobile phone coverage along designated major highways ($25 million over three years)(a) • Building Additional Rural Networks (BARN—$70 million) • Local Government Fund ($45 million) • Expanded mobile phone coverage in South Australia, Western Australia and Tasmania ($1 million per state)(a) • Connecting Tasmanian schools ($15 million)(a) Other programs 295.8 • Untimed local calls for remote Australians living in extended zones ($150 million over three years); • Television Fund to extend SBS service and enable improved television reception in regional areas ($120 million over five years) • Launceston Broadband Project ($15 million) • Trials in Innovative Government Electronic Regional Services (TIGERS—$10 million) Information 161 • Building IT Strengths (BITS—$158 million Technology projects • NetAlert (formerly known as Netwatch—$3 million) Rural Transaction 70 n/a Centres Total 1 000.2

(a) Funds allocated outside the NTN boards decision making process

12 Telstra Sale: Background and Chronology

Table 3: Summary of disbursement of proceeds from T1 and T2 Amount Description of disbursement $million First Tranche Regional Telecommunications Infrastructure Fund 250.0 Natural Heritage Trust(a) 1 150.0 Estimated amount received by the Commonwealth for the retirement of 12 840.0 Commonwealth debt Total Proceeds of First Tranche(c) $14 240 Second Tranche Social Bonus(b) 1000.2 Estimated amount payable by November 2000 to the Commonwealth for the 15 025.8 retirement of Commonwealth debt(b) Total Proceeds of Second Tranche(c) $16 026

(a) The Natural Heritage Trust was established with $1.1 billion from the first tranche sale of Telstra. (b) Includes $250 million to The Natural Heritage Trust. (c) Selling costs associated with the Telstra floats are not taken into account in compiling this table. The ANAO has estimated the sale costs to be $260 million for T1 and $169 million for T2. Towards a Possible Third Tranche Sale of Telstra

A legislative requirement of the second tranche sale of Telstra was the establishment of an independent inquiry into the adequacy of regional telecommunications services before any further sell-off of the Commonwealth's shareholding in Telstra below 50.1 per cent. In March 2000, six months after the T2 sale, the Minister for Communications, Senator the Hon. Richard Alston, announced the establishment of an independent inquiry, the Telecommunications Service Inquiry (TSI), to assess the adequacy of telecommunications services in metropolitan, regional, rural and remote areas. The inquiry was conducted by Mr Tim Besley AO (chair), Mr Ray Braithwaite and Ms Jane Bennett and reported to Senator Alston on 30 September 2000. It specifically did not look into the privatisation of Telstra.31

The Inquiry's report was released on 30 September 2000 and noted that:

Australians generally have adequate access to a range of high quality, basic and advanced telecommunications services comparable to the leading information economies of the world. The inquiry research indicates that Australians who live in metropolitan and regional centres enjoy good telecommunication services and are generally satisfied with them. However, a significant proportion of those who live and work in rural and remote Australia have concerns regarding key aspects of services which, at this stage, are not adequate. Their concerns relate primarily to: • the timely installation, repair and reliability of basic telephone services; • mobile phone coverage at affordable prices; and

13 Telstra Sale: Background and Chronology

• reliable access to the Internet and data speeds generally.32

The Government released a response to the TSI which included a funding package of $163.1 million (see Attachment A) to further improve telecommunications services in regional, rural and remote Australia. Major spending initiatives are summarised in Table 4.

Following continued public debate concerning the full privatisation and further calls by rural and regional telecommunications users for improvements to telecommunications services, the Government appointed (on 16 August 2002) Mr Dick Estens to conduct a further inquiry into regional telecommunications services. The Regional Telecommunications Inquiry (RTI) was to report by November 2002. Specifically, the RTI was to report on:

… whether telecommunications services to regional, rural and remote areas of Australia are adequate and the arrangements that should be put in place to ensure that all Australians continue to share in the benefits of further service improvements and developments in technology.33

The RTI report was released on 6 November 2002. The inquiry's overall assessment was that the Government had responded positively and comprehensively to the TSI findings, and that the arrangements that have been put in place are addressing the community concerns identified in the TSI report. It made a number of recommendations to improve areas where telecommunications services still needed improvement and as to how arrangements could be put in place to provide a greater level of certainty as to the future proofing of ongoing benefits to regional, rural and remote communities. The report noted:

The Inquiry's overall assessment is that the Government has responded positively and comprehensively to the TSI findings, and that the arrangements that have been put in place are addressing the community concerns identified in the TSI report.

Concerns have been expressed, through submissions to the Inquiry, about the reliability of Telstra's telephone network, and the speed of available Internet services in regional, rural and remote areas. The Inquiry finds that there are particular areas in rural Australia where improvements need to be made to network reliability. The Inquiry finds that the Government's Network Reliability Framework, strengthened according to Recommendation 2.9 in this report, should deliver adequate services.34

The Government released its response to the Regional Telecommunications Inquiry on 25 June 2003. It accepted all 39 of the report's recommendations (see Attachment B). The Government also announced it would invest $181 million to improve access to telecommunications services, enhance a range of existing services, and ensure that regional Australia continues to share equitably in the benefits of future technologies. Major spending initiatives are summarised in Table 4.

In general, both the TSI and RTI have concluded that telecommunications services in rural and regional Australia are generally adequate and that where deficiencies exist these are

14 Telstra Sale: Background and Chronology

being addressed. However, continued debate has surrounded the Government's intention to fully privatise Telstra. The Opposition and the minor parties continue to oppose the sale as do the independent Senators.

Table 4: Summary of major telecommunications funding initiatives since the T2 sale Response to Regional Response to Telecommunications Telecommunications Inquiry Service Inquiry (2001) $ million (2003) $ million Extended mobile phone coverage 37.7 Further extend mobile coverage 15.9 for towns with populations greater to small population centres and than 5000 along highways Additional mobile phone coverage 50.5 Additional funding for satellite 4 for towns with populations under subsidy scheme 500 Internet Assistance Programme 12 Information technology training 10.1 and support services in rural and remote areas National Communications Fund 52.2 A National Broadband Strategy 2.9 Implementation Group Payphones 0.4 A network of broadband 8.4 demand aggregation brokers in regional Australia. Funding for consumer 3.4 Coordinated Communications 23.7 representation Infrastructure Fund (CCIF) to accelerate the roll-out of broadband into regional Australia in concert with the demand aggregation brokers. Community information program 6.9 Higher Bandwidth Incentive 107.8 (not all funding was expended on Scheme (HBIS). The HBIS will this program) provide financial incentives to higher bandwidth service providers to offer services in rural and remote areas at prices reasonably equitable with those available in urban areas. Telecommunications Action 8.3 Plan for Remote Indigenous Communities (TAPRIC) Total 163.1 181.1

The Government introduced legislation, the Telstra (Transition to Full Private Ownership) Bill 2003, for the sale of its remaining shareholding in Telstra (subject to taxpayers receiving a fair price for their shares) on 26 June 2003, a day after it announced its

15 Telstra Sale: Background and Chronology

response to the RTI. The Bill removes the restriction contained in the Telstra Corporation Act 1991 that requires the Commonwealth to retain a majority shareholding (50.1 per cent) in Telstra, thus enabling its full privatisation.

The Telstra (Transition to Full Private Ownership) Bill 2003 also includes provisions for regular and independent reviews of regional telecommunications services. The Bill leaves options open for the timing and type of sale:

The Bill provides for the timing of the sale to remain open. The Government, however, will be seeking to maximise the returns from the sale of its remaining holdings. The Bill retains for the Commonwealth flexibility to develop detailed arrangements for the sale process, which will protect and maximise the Commonwealth's interests. The provisions to facilitate the sale are broadly defined to allow not only conventional single tranche sales but sales effected through a number of tranches, or the use of other market instruments, such as hybrid securities, and authorise any borrowings by Government arising from the sale of such securities.35

The Government has indicated a preference to sell the Commonwealth's remaining shares in Telstra in three equal instalments beginning from 2004–2005. Conclusion

The privatisation of Telstra has been one of the key public policy debates in telecommunications for much of the last decade. Opposition to the sale has been widespread, particularly in rural areas where telecommunications services have been considered less than adequate and where greatest concerns have been held over the willingness of a fully privatised Telstra to continue to fund infrastructure improvements in areas where the financial case for such improvements was less compelling.

A large number of investors in the first tranche sale have enjoyed a significant rise in share value and constant dividend streams. For investors in the second tranche sale of Telstra, their investment has been severely eroded (in the short-term at least) by the global downturn in telecommunications stocks in the last couple of years. Telstra's share price remains well below the T2 offer price and around half its peak price of $9.16 on 30 November 1999.36 Whilst Telstra still enjoys a high degree of market power in most areas (particularly local access/fixed calls) the current share price is a reminder of the short term volatility of the share market and the inherent risks for private investors.

At the time of writing (mid-September 2003) the Government is four votes short of getting the sale legislation passed in the Senate and appears well short of any deal with the independent Senators. However, with a number of potential double dissolution triggers available and the prospect of a very different Senate composition after the next election, negotiation avenues to enable passage of the sale legislation still appear open.

16 Telstra Sale: Background and Chronology

Appendix A: Government's Response to Telecommunications Service Inquiry (TSI)37

The Government's response to the TSI included further strengthening of the Customer Service Guarantee to reduce new service connection times and strengthening of the Universal Service Obligation in relation to the provision of temporary services:

• To ensure people in regional, rural and remote Australia receive better telephone services, the Government will strengthen the Customer Service Guarantee to bring down the maximum time for connection of the standard telephone service in remote Australia from 12 to six months. The Government will also require Telstra and any other primary universal service provider to include in its Universal Service Plan an undertaking to offer temporary services or solutions in a range of situations.

• The new requirements for temporary services will mean that no Australian will have to wait longer than 30 working days to get access to a telephone service. A temporary service will also be available for any Australian whose service can't be repaired in five working days.

Funding (not from proceeds of either T1 or T2) of $163.1 million was provided to improve services in regional, rural and remote Australia. This included the Government allocating up to $88.2 million over three years to improve and extend mobile phone coverage in areas currently without terrestrial mobile phone services. Major initiatives include:

• $37.7 million for mobile phone coverage in population centres of 500 and above. The full amount was allocated in the 2001–02 Budget. The allocation was $15.5 million in 2001–02, $12.2 million in 2002–03 and $10.0 million in 2003–04.

• $50.5 million for improved mobile coverage in other areas (less than 500 people). – $20.4 million to provide improved coverage on 35 regional highways, subject to ongoing viability – $20.4 million to provide coverage to 55 towns with populations under 500, subject to community need and ongoing viability – $7.0 million towards the WirelessWest project to improve mobile phone services in the south west land division of Western Australia – $50 000 to address a black spot in mobile phone coverage in the ACT, and – $2.1 million satellite handset subsidy scheme, providing up to $1000 to offset the purchase price of a handset for those people who are unable to access terrestrial mobile phone services.

• Internet Assistance Programme—Federal funding of $12 million for better quality and faster access to dial-up Internet services (plus up to $38 million contribution from Telstra). Total $50 million over three years

17 Telstra Sale: Background and Chronology

• $52.2 million for a National Communications Fund. Funding over three years from July 2002

• improved payphone and other services for Indigenous communities in remote areas, including the allocation of $400 000 for a study of telecommunications requirements

• $3.4 million over four years from 1 July 2002 to fund increased consumer representation

• $6.9 million for a community information program in regional areas. The Government also agreed to:

• strengthen the regulation relating to maintaining and improving the quality of service in response to recommendations of the Inquiry report. Primary Universal Service Providers will be required to meet reliability standards for services provided under the Universal Service Obligation (a breach may attract a penalty of up to $10 million)

• revise the reporting framework for major service providers, which will allow consumers to make more informed decisions based on price and quality in the increasingly competitive telecommunications market

• refer two recommendations relating to competition in the telecommunications industry and Pay TV content to the Productivity Commission

• appoint Mr Alan Horsley to the Australian Communications Authority. Mr Horsley's skills and background will ensure the Authority is in a position to have due regard to regional, rural and remote issues

• Consider the reviews of the USO contestability pilots, scheduled for 2002, to assess whether upfront incentives should be offered to potential USO providers

• The ACA will be reviewing the operation of the CSG in a multi-carrier environment with a view to ensuring standards remain appropriate. Reviews of telecommunications specific regulations will be specifically required

• Programmes supporting new market models, for example the Building Additional Rural Networks initiative, will be adjusted as necessary to ensure they support the development of high speed regional networks, and

• that the Department of Communications, Information Technology and the Arts, in consultation with other relevant organisations will assess unmet demand for TTY training and work with the National Relay Service to incorporate training into the service.

18 Telstra Sale: Background and Chronology

Appendix B: Government's Response to the Regional Telecommunications Inquiry38

The Government released its response to the Regional Telecommunications Inquiry (RTI) on 25 June 2003. It accepted all 39 of the report's recommendations and will invest $181 million improve access to telecommunications services and enhance a range of existing services. The Government's response outlined the following initiatives:

Competition and Consumer Safeguards: The Inquiry recognised Australia's world-leading telecommunications consumer safeguards, which include the Universal Service Obligation, the Customer Service Guarantee, the Network Reliability Framework, priority access for people with life- threatening illnesses, price controls on less competitive services and the Telecommunications Industry Ombudsman. The Inquiry made a number of recommendations to further enhance these safeguards.

Adequacy of Services: In order to ensure adequacy of services, the Inquiry recommended that: Telstra be required to provide a formal undertaking to the Government to raise the reliability of its worst performing exchange service areas, with timeframes and funding commitments (Recommendation 2.9); and that the Government impose a licence condition on Telstra to provide a minimum dial-up internet speed of 19.2kbps or equivalent throughput over its fixed line network (Recommendation 4.1).

Enhancements to existing services: The Inquiry also recommended a number of enhancements to existing services, including in regional Australia. The Government has agreed to these recommendations and is committed to their implementation including a formal undertaking from Telstra in relation to the completion of the upgrade of its older radio concentrator systems and improve, as soon as possible, the quality of phone services affected by pair gain systems. Telstra will also provide an undertaking on how it is addressing dial-up data speed issues on these systems.

Additional funding for existing services: The Inquiry recommended that the Government provide additional funding to support the capital costs of extending land-based mobile phone services to small population centres and key highways in regional Australia. The Government has already provided funding to build 915 mobile phone base stations and repeaters along Australia's national highways, on regional highways, and in regional towns, which will result in 98% of the population having land- based mobile phone coverage. The Government will spend an additional $15.9 million over four years to further extend coverage to small population centres and along highways in regional Australia.

The Government will review the eligibility guidelines for the satellite subsidy scheme and has committed an additional $4.0 million to extend the subsidy. The Government will also provide an additional $10.1 million over four years for information technology training and support services in rural and remote areas, building on the significant funding already provided for these services under the Networking the Nation program.

'Future proofing': The need to ensure that people in regional areas continue to share equitably in the benefits of advances in technologies (i.e. future proofing) was a specific term of reference of the Inquiry and is of critical importance to the future livelihood of regional Australia. In its response, the Government has committed to a blueprint for 'future proofing' regional Australia's communications future, which addresses each of the recommendations in the report, as well as many of the recommendations in the recent Broadband Advisory Group report.

19 Telstra Sale: Background and Chronology

National Broadband Strategy: As part of its Inquiry response, the Coalition Government will develop a National Broadband Strategy (NBS) with funding of $142.8 million over four years. A central objective of the NBS will be to provide access to affordable broadband services in regional Australia. To be fully effective the NBS will require a partnership between the Commonwealth, the States and Territories, local government and industry in coordinating the future demand for broadband services, particularly in regional Australia. A National Broadband Strategy Implementation Group (NBSIG) will develop and oversee the Strategy, with Federal Government funding of $2.9 million.

It is recognised both in Australia and internationally that the effective aggregation of all likely demand for broadband services has the ability to extend broadband network infrastructure further out into lower populated, less economic areas. The Coalition Government is committing an additional $8.4 million over four years towards a network of broadband demand aggregation brokers in regional Australia. The Government will commit $23.7 million over four years to a Coordinated Communications Infrastructure Fund (CCIF) to accelerate the roll-out of broadband into regional Australia in concert with the demand aggregation brokers. The States and Territories will be asked to at least match this funding dollar-for-dollar.

Higher Bandwidth Incentive Scheme: The Coalition will spend $107.8 million over four years on the Higher Bandwidth Incentive Scheme (HBIS). The HBIS will provide financial incentives to higher bandwidth service providers to offer services in rural and remote areas at prices reasonably equitable with those available in urban areas. The Government will finalise the details of the HBIS in consultation with key regional stakeholders and industry over the next six months.

Legislated regular reviews of regional telecommunications: The Government understands that people in regional Australia want a guarantee that their future communications needs will be assessed on a regular basis and, accordingly, it will legislate to require the current and future governments to conduct regular reviews of the adequacy of regional communications services. These reviews will be conducted by independent expert groups and there will be a requirement upon governments to formally respond to them.

Telstra local presence in regional Australia: Finally, the Inquiry found that regional Australia values the service improvements achieved through Telstra CountryWide and its direct relationship with customers. The Inquiry recommended that Telstra, as the primary universal service provider, be required to maintain an ongoing local presence in regional, rural and remote Australia into the future. The Government will impose a licence condition on Telstra to give effect to this recommendation. Under this licence condition Telstra will be required to prepare a local presence plan setting out the range of activities and strategies it will undertake to maintain this local presence in regional Australia.

20 Telstra Sale: Background and Chronology

Appendix C: Chronology

Source Milestones Details Documents 12 June 1975 Telecommunications Act 1975 receives royal assent. Senate Journal, Telecommunications was separated from postal 12 June 1975. Australian functions in 1975 through the establishment of two Telecommunications separate statutory authorities under this Act—the Commission Australian Postal Commission and the Australian (Telecom Australia) Telecommunications Commission (Telecom established Australia). 1 July 1989 Creation of an independent regulator AUSTEL. 'Liberalisation of Telecom Australia's position as a monopoly supplier the Creation of telecommunications was maintained in the short term. AUSSAT and independent sector - Australia's Overseas Telecommunications Corporation (OTC) regulator AUSTEL experience', remained intact but would be subject to review in Department of 1990. Communications, Information Technology and the Arts. 6 November 1991 Telecom is incorporated and begins trading under 'Telstra shareholder the requirements of corporation law as Australian – History', Telecom Department of Telecommunications Corporation although its incorporated Communications, trading name remains Telecom. Information Technology and the Arts. 1 February 1992 Telecom and OTC merge to form the Australian and 'Telstra shareholder Overseas Telecommunications Corporation (still – History', Telecom and OTC Department of trading as Telecom). AUSSAT satellite merged Communications, communication network sold to a new market Information entrant Optus Communication who would provide Technology and the competition to Telecom in local network Arts. infrastructure provision. April 1993 Telecom changes name to Telstra Corporation Telstra—'History Limited. Trades under Telstra for international and development of Telecom name the Company', business but to retain Telecom for domestic trading. changed to Telstra Telstra Investor for overseas trading Relations. 1 July 1995 Trading name changed from Telecom to Telstra for Telstra—'History domestic business. and development of Telecom name the Company', changed to Telstra Telstra Investor for domestic trading Relations. 23 January 1996 The Coalition announces its 'communications John Howard, Press policy' in the lead up to 1996 election, including conference, Sydney, Opposition leader 23 January 1996. that in its first term it would sell no more than a

21 Telstra Sale: Background and Chronology

Source Milestones Details Documents John Howard third of Telstra (of which no more than 35 per cent announces Coalition can be owned by foreigners). The remaining two- policy to sell one thirds of Telstra to remain in public ownership. Any third of Telstra further sell down would be considered towards the end of a Howard Government first term when it would formulate a proposal and seek a specific mandate on that proposal at the then forthcoming election. The Coalition wins Federal election—key element of its 2 March 1996 telecommunications policy includes the partial Howard wins privatisation of national telecommunications carrier Federal election Telstra.

The Government announces a scoping study into the 11 April 1996 Australian National proposed sale of one-third of Telstra. The scoping study Audit Office, Sale Government is to advise on the legal, technical, commercial, policy, of One-third of announces scoping public communications and management advice needed Telstra. ANAO, study into sale of to promptly proceed with the sale. Canberra, 1998, p. 27. one third of Telstra 2 May 1996 Government introduces the Telstra (Dilution of House of Public Ownership) Bill 1996. For a background to Representatives, Government Debates, 2 May the bill see Bills Digest No. 72, 1995–96, Telstra introduces first 1996—Telstra (Dilution of Public Ownership) Bill 1996 by Dr Telstra sale (Dilution of Public Kim Jackson, Brendan Bailey and Elizabeth Ownership) Bill legislation Williams, Department of the Parliamentary Library. 1996: First and Second Reading, pp. 294–302. 9 September 1996 Report from the Senate Environment, Recreation, Senate, Debastes, Communications and the Arts References 9 September 1996, Senate committee pp. 3070–3078. Committee, Telstra: To Sell or not to Sell? tabled in report into Telstra Parliament. The report recommends that Telstra sale tabled remain in full public ownership. 13 September 1996 • Revenue—$15 238 million Telstra—Annual • Profit (after tax, abnormals and minorities)— Report 1996. Telstra annual report $2304.7m for year ending 30 June 1996 released Total dividend to the Commonwealth $1368m 11 December 1996 Bill for the sale of T1 passes the Senate with Senate, Debates, support of independents Mal Colston and Brian 11 December Bill for sale of T1 1996— Telstra Harradine. passes the Senate (Dilution of Public Ownership) Bill 1996: Third Reading, p. 7245.

22 Telstra Sale: Background and Chronology

Source Milestones Details Documents 19 December 1996 The Telstra (Dilution of Public Ownership) Act 1996 receives Royal Assent on 19 December 1996. The Telstra (Dilution of Public Ownership) Act 1996 receives Royal Assent 20 December 1996 The request for proposals states that the global Australian National coordinator (or coordinators) would be contracted to Audit Office, Sale OASITO invites of One-third of undertake a broader management role than in proposals for the Telstra. ANAO, previous Commonwealth public share offers and role of global Canberra, 1998, outlined the selection criteria. This role is to p. 33. coordinators and/or include: project management of the offer; lead managers management of the selling syndicate including preparation and presentation of advice to Office of Asset Sales and IT Outsourcing (OASITO) and the Government; coordination of other advisers including legal advisers and accountants; manage, arrange and participate in all aspects of sale preparation; manage and arrange a domestic marketing campaign and offer logistics; and monitor and participate in aftermarket activity. 13 March 1997 At the conclusion of the selection process, ABN Australian National AMRO Rothschild, Credit Suisse First Boston and Audit Office, Sale Joint Global of One-third of JB Were & Son are invited to act as Global Coordinators Telstra. ANAO, Coordinators and as Lead Managers in Europe, the appointed Canberra, 1998, Americas and Australia respectively. p. 34. 18 April 1997 The Government announces that—after consultation 'Telstra – with the Board of Telstra and following the advice Recapitalisation', Telstra Joint press release, of the Government's sale advisers—it has been recapitalisation Minister for agreed that Telstra will make a payment from announced Finance, the Hon. retained earnings (effectively a special dividend) to John Fahey MP and the Commonwealth of $3 billion by the end of this Senator the Hon .Richard Alston, financial year. Telstra will raise new debt in Minister for association with this initiative to bring its capital Communications structure more in line with other and the Arts, telecommunications companies. 18 April 1997. 21 May 1997 The Government appoints two accounting firms for 'Appointment of the partial sale of Telstra: accountants for the Government partial sale of • Coopers and Lybrand to act as the Government's appoints Telstra', Press accounting adviser; and accountants for release, Minister for • Price Waterhouse appointed as investigating Finance, the Hon. Telstra sale accountant. John Fahey MP, 21 May 1997.

23 Telstra Sale: Background and Chronology

Source Milestones Details Documents 12 September 1997 Reservations for a prospectus for the forthcoming 'Late rush as Telstra Telstra float close. About 2.25 million people have offer shuts to T1 prospectus public', Sydney reserved a prospectus which will enable them to reservations close Morning Herald, receive 50 per cent more shares than the minimum 13 September 1997, allocation to be set by the Government. p. 7. 19 September 1997 Daiwa is suspended from its role in the Telstra Daiwa Securities selling syndicate for the 'Rest of the World' region and the Telstra Daiwa suspended public share offer, in the light of investigations of Daiwa by regulatory from its role in the press release, authorities in Japan. The suspension is invoked Telstra selling Minister for under the terms of Daiwa's agreement with the Finance, the Hon. syndicate Commonwealth. John Fahey MP, 18 September 1997.

29 September 1997 • Revenue - $15 983 million Telstra—Annual Report 1997. Telstra annual report • Profit (after tax, abnormals and minorities)— for year ending $1617m 30 June 1997 Total dividend to the Commonwealth—$4146m released ($0.322 per share—includes $3000m special dividend). Shares purchased in T1 float not eligible for this dividend. 29 September 1997 The Telstra public share offer (T1) launched with Launch of total sale proceeds expected to amount to more than Australian public Telstra public share Offer Document, $14 billion. Minimum allocation set at 400. Over offer launched Joint press 2.3 million investors reserved the offer document. conference, Minister for Finance, the Hon. John Fahey MP and Telstra CEO Frank Blount, 29 September 1997. 7 October 1997 The Federal Government imposes a limit of 8000 on Matthew Kidman the number of Telstra shares available to and Anthony Stockbroking firms Hughes, 'Telstra stockbroking firms for private clients. Stockbrokers limited to 8,000 limit set at 8,000', and financial planners applied for 5.3 billion shares shares for private Sydney Morning (or 25 per cent more than the total number of shares Herald, 7 October clients to be sold) but will be restricted to a total of only 1997, p. 25. 650 million shares for private clients. 15 October 1997 The Australian public, broker firm and employee 'Telstra offer opens', share offer opens on 15 October 1997. Over The Canberra Australian public Times, 15 October 2 million offer documents have been sent out to date share offer opens 1997, p. 29. with another 300 000 to arrive this week.

24 Telstra Sale: Background and Chronology

Source Milestones Details Documents 27 October 1997 The global institutional book build opens on 1.8 million apply 27 October 1997. Initial volume bids by institutions for Telstra Shares, Global institutional Press release, from Australia and overseas have been strong. book build opens Minister for Finance Institutions will be submitting price bids during the and Administration, week beginning 10 November 1997. the Hon. John Fahey MP, 5 November, 1997. 31 October 1997 The broker firm and employee offers close. More 1.8 million apply than 56,000 eligible employees—approximately 90 for Telstra Shares, Broker firm and Press release, per cent of those staff eligible—choose to apply for employee share Minister for Finance shares. offers closed and Administration, the Hon. John Fahey MP, 5 November, 1997. 3 November 1997 The Australian public share offer closes on 1.8 million apply 3 November 1997. The Government received for Telstra Shares, Public share offer Press release, 1 886 000 share applications. First instalment price closes Minister for Finance set at $1.95 per share. The price of the second and Administration, instalment for public applicants, due for payment on the Hon. John 17 November 1998, will be no more than $1.35, Fahey MP, representing a total maximum price of $3.30 a share 5 November, 1997. Public applicants who purchase instalment receipts under the Public Offer and hold them until the final instalment is due will be entitled to a loyalty discount on the final instalment of at least 5 cents below the final instalment payable by institutional applicants. 11 November 1997 Minister for Finance and Administration, the Hon. Telstra Share Offer John Fahey MP and Telstra Chairman, David Hoare Supplementary Telstra share offer Notice, The issue a supplementary notice regarding the status of supplementary Australian the pay TV industry noting that the ACCC has notice issued Financial Review, commenced proceedings to restrain the completion 11 November 1997. of a merger between Foxtel (50 per cent owned by Telstra) and Australia Media. Australia has also threatened to commence legal action against the Foxtel partners. 14 November 1997 The global institutional book build closes on Matthew Kidman, 14 November 1997. Australian institutions are 'Telstra bids The global in:$3.40 is the tip', reported to have bid between $3.30 and $3.40 a institutional book The Age, share after the Government increased the indicative build closes 14 November 1997. range to $3.40. 15 November 1997 • Final pricing for T1 share completed - $3.40 for Australian National institutional investors discounted to $3.30 for Audit Office, Sale

25 Telstra Sale: Background and Chronology

Source Milestones Details Documents Australian retail investors. of One-third of Final pricing • First instalment of $2.00 per share for Telstra. ANAO, completed Canberra, 1998, institutional investors discounted to $1.95 for p. 14. Australian retail investors.

• Second instalment of $1.40 per share for institutional investors discounted to $1.35 per Peter Rees, 'Telstra share for Australian retail investors. buyers instant profit', Sunday At the issue price of $3.40 per share the offer of Telegraph, one-third of Telstra's shares is more than four times 16 November, 1997. subscribed. The Australian retail offer, which closed on 3 November 1997, provided sufficient demand to sell all 4.29 billion shares on offer while the institutional offer is 6.2 times subscribed. • retail investors receive 40.7 per cent of shares; • institutions receive 40 per cent of shares; • brokers receive 15.1 per cent of share allocation for clients; and • Telstra employees receive 4.2 per cent of shares. 17 November 1997 Telstra instalment receipts debut on the Australian Geoff Elliot, 'Instant Stock Exchange (ASX) at 12.30pm. Over 294 profits from Telstra debuts on Telstra', The million receipts are traded on first day as 1.8 million stock exchange Canberra Times, investors make an immediate profit with the first 18 November 1997. instalment receipts ($1.95) trading at $2.60. High of $2.75. Closes at $2.67. Concurrent listings also offered on the New York and New Zealand stock exchanges.

19 November 1997 The Prime Minister, John Howard and Treasurer, David McKenzie Peter Costello hint that they would look at a further PM and Treasurer and Deborah float of Telstra after the next election. The Treasurer Brewster, 'Second hint at further Telstra confirms at a National Farmers' Federation Telstra sell-off on sell-off conference that net proceeds of the sale would be cards', The Australian, used to reduce public debt and not be used for tax 19 November 1997, cuts. pp. 1–2. 15 March 1998 John Howard announces in closing address to the Michael Millet, Liberal Party's national convention that the 'Howard's $45 bn Howard announces war chest', The Government will introduce enabling legislation to further sale of Sydney Morning sell the Commonwealth's remaining shareholding in Telstra Herald, 16 March Telstra. 1998. 30 March 1998 Government introduces the Telstra (Transition to House of Full Private Ownership) Bill 1998. For background Representatives, Government Debates, 30 March information to the Bill see Bills Digest No. 176, introduces legislation 1998—Telstra 1997–98, Telstra (Transition to Full Private to sell remaining (Transition to Full Private Ownership)

26 Telstra Sale: Background and Chronology

Source Milestones Details Documents shareholding in Ownership) Bill 1998 by Lee Jones, Department of Bill 1998: First and Telstra the Parliamentary Library, Canberra. Second Reading, pp. 1891–1897. 31 March 1998 Interim dividend paid $0.07 (ex-dividend date Telstra Investor 26 February 1998)—franking 100 per cent. Relations— Interim dividend paid Dividend History. 1 April 1998 Senate refers the Telstra (Transition to Full Private Senate, Debates, 1 Ownership) Bill 1998 to the Environment, April 1998, p. 1776. Senate refers the Recreation, Communications and the Arts Telstra sale Bill to Legislation Committee for inquiry and report. Senate Committee 26 May 1998 Environment, Recreation, Communications and the Environment, Arts Legislation Committee report into Telstra Recreation, Senate committee Communications (Transition to Full Private Ownership) Bill 1998 is recommends sale and the Arts presented to Senate. The report recommends the Bill Bill proceed Legislation proceed subject to a number of recommendations Committee report including that that a portion of the proceeds from into Telstra (Transition to Full the sale of the remaining two-thirds of the Telstra Private Ownership) Corporation Ltd be used to upgrade the existing Bill 1998. infrastructure available for telecommunications services in rural areas. 9 July 1998 It is reported that the Government had done a deal Anne Davies, 'PM s with the National Party to ensure the Telstra $400m Telstra deal Nationals win woos Nats', The (Transition to Full Private Ownership) Bill 1998 improvements for Sydney Morning passes through the Senate (the Prime Minister is rural Herald, 9 July 1998, reported to have offered a communications package p. 1. telecommunications worth $400 million for rural areas). 11 July 1998 The Telstra (Transition to Full Private Ownership) Senate, Debates, 11 Bill 1998 is defeated in the Senate on the vote of July 1998, pp. Telstra sale 5675–5677. Mal Colston. legislation defeated in Senate by Colstan vote 22 July 1998 The Government announces a staged approach to 'The Sale of Telstra', the full privatisation of Telstra. The major points of Joint press release, Government Minister for Finance the new policy included: announces staged and Administration, • introduction to Parliament of a new approach for further the Hon. John Telecommunications Bill bringing together Fahey MP and sale of Telstra. customer service safeguards which are to apply Senator the Hon. Richard Alston, irrespective of any further changes in Telstra's Minister for ownership; Communications, • the Government to sell the remainder of Telstra the Information in stages. The first sale will be of 16 per cent, Economy and the which will leave 51 per cent, and majority Arts, 22 July 1998. control, in Government hands; and

27 Telstra Sale: Background and Chronology

Source Milestones Details Documents no further sale, beyond 49 per cent, until the Government has established an independent inquiry which will assess Telstra's service levels to customers in each of metropolitan, rural and remote areas against prescribed standards. 26 August 1998 • Revenue—$17 302 million Telstra—Annual • Profit (after tax, abnormals and minorities)— Report 1998. Telstra annual report $3004m for year ending 30 June 1998 released Total dividends provided for/or paid $1802m ($0.14 per share) 3 October 1998 Coalition wins 1998 federal election. Key Coalition communications policy platform included the Howard Government further sale of Telstra shares (up to 49.9 per cent) returned in federal and retention of full majority public ownership until election independent inquiry certifies the adequacy of rural and regional telecommunications services. 19 October 1998 The ANAO estimates gross proceeds from the first Australian National tranche sale of Telstra shares to be $14.24 billion. Audit Office, Sale ANAO completes of One-third of ANAO estimates the Commonwealth's direct costs performance audit Telstra. ANAO, to be $260 million. Direct sale costs represent 1.8 report on T1 sale Canberra, 1998, per cent of gross proceeds compared to 1.5 per cent p. 13. for the 1996 third tranche sale of the Commonwealth Bank (an offering of shares in a previously listed company with proceeds of $5.15 billion) and 2.8 per cent for the Qantas initial public offering (proceeds of $1.45 billion). Selling commissions totalling $124.1 million and a $35.6 million project management fee paid to the Global Coordinators comprised the majority of sale costs. 30 October 1998 Final dividend paid $0.07 (ex-dividend date Telstra Investor 22 September 1998)—ranking 100 per cent. Relations— Final dividend paid Dividend History. 12 November 1998 The Government re-introduces the Telstra House of (Transition to Full Private Ownership) Bill 1998. Representatives, Government re- Debates, 12 The Bill contains most of the provisions of the introduces legislation November 1998— previous Bill (introduced in March 1998 but to sell remaining Telstra (Transition rejected in the Senate in July 1998) but also to Full Private shareholding in provides that an independent inquiry certify that Ownership) Bill Telstra 1998: Second Telstra has met prescribed service standards before Reading, the Commonwealth can relinquish majority pp. 246–248. ownership. The Bill also sets out the Social Bonus initiatives.

28 Telstra Sale: Background and Chronology

Source Milestones Details Documents 17 November 1998 The second instalment receipt payment ($1.40 or $1.35 for Australian investors) for T1 shares due Payment of second today. instalment receipt on T1 shares due 2 December 1998 Senate refers the Telstra (Transition to Full Private Senate, Debates, Ownership) Bill 1998 to the Environment, 2 December 1998, Senate refers the p. 1101. Communications, Information Technology and the Telstra sale Bill to Arts Legislation Committee for inquiry and report Senate Committee by 15 February 1999 (subsequently extended to 8 March 1999). 22 December 1998 Government announces Joint Global Co-ordinators 'Announcement of and Business Adviser for the sale of further Joint Global Co-Coordinators Commonwealth equity in Telstra (T2). The firms and Business selected for the role of Joint Global Co-ordinators Adviser for the include: Further Sale of • ABN AMRO Rothschild; Telstra', Press release, Minister for • Credit Suisse First Boston; and Finance and • JB Were. Administration, the Hon. John Fahey The Government's Business Adviser is to be MP, 22 December Goldman Sachs. 1998. 16 February 1999 Dr Ziggy Switkowski appointed as the new Chief 'Government Executive Officer of Telstra. He replaces outgoing welcomes New Telstra CEO appointment of new CEO Frank Blount. appointed Telstra CEO', Joint press release, Minister for Finance and Administration, the Hon. John Fahey MP and Senator the Hon. Richard Alston, Minister for Communications, Information Technology and the Arts, 16 February 1999. 8 March 1999 Senate Environment, Communications, Information Report by the Technology and the Arts Legislation Committee Senate Senate committee Environment, reports to Senate supporting the full privatisation of recommends sale Communications, Telstra, noting that there is no substantial opposition Bill proceed Information in submissions to further privatisation of Telstra. Technology and the Labor and the Democrats submit dissenting reports. Arts Legislation Committee into Telstra (Transition to Full Private

29 Telstra Sale: Background and Chronology

Source Milestones Details Documents Ownership) Bill 1998 and associated Bills. 30 April 1999 Interim dividend paid $0.07 (ex-dividend date Telstra Investor 22 March 1999)—franking 100 per cent. Relations— Interim dividend paid Dividend History 20 June 1999 The Government announces an additional allocation 'Assessing the of $314 million (the social bonus initiatives) from future—the Telstra Senator Alston social bonus', Press the next Telstra sale to expand access in regional, announces $314m in release, Senator the rural and remote Australia to the improved telecommunications Hon Richard telecommunications infrastructure. The initiative Alston, Minister for initiatives brings the total social bonus from the sale of the Communications, Information next tranche of Telstra to $1 billion. Technology and the Arts, 20 June 1999. 21 June 1999 The Telstra (Transition to Full Private Ownership) Senate, Debates, Bill 1998 passes the Senate with the support of 21 June 1999, The Telstra Telstra (Transition independent Senators, Mal Colston and Brian (Transition to Full to Full Private Harradine. Private Ownership) Ownership) Bill 1998: Third Bill 1998 passes Reading, pp. 5826– senate allowing T2 5827. sale to proceed 5 July 1999 Telstra (Further Dilution of Public Ownership) Act 1999 receives royal assent. The Telstra (Further Dilution of Public Ownership) Act 1999 receives royal assent 25 July 1999 The Government launches the T2 public share offer Shaun Anthony, with a minimum share guarantee of 400 shares. The 'Telstra opens $18b T2 share offer sale', The West Government will sell 2.132 billion shares or 16.6 launched Australian, 26 July per cent of Telstra. Existing shareholders with more 1999. than 2000 shares entitled to buy a minimum of one share for every five they own (up to a maximum of 10 000). 16 August 1999 Public offer document reservations for those who do Telstra 2 Share not own Telstra shares close. By pre-registering for Offer, public Public offer advertisement, a public offer document, investors are guaranteed an document Weekend Australian allocation of 400 shares. reservations close Financial Review, 31 July–1 August 1999, p. 16.

30 Telstra Sale: Background and Chronology

Source Milestones Details Documents 23 August 1999 JB Were and Ord Minnett appointed as joint lead Geoff Elliot, 'Telstra managers in Australia. ABN-AMRO Rothschild and broking line-up Joint Lead Managers settled', The Warburg Dillon Read appointed joint lead managers appointed to T2 sale Australian, in Europe. JB Were and ABN-AMRO Rothschild to 24 August 1999, head Asian sales. CS First Boston and Salomon p. 21. Smith Barney will lead North American sales. 26 August 1999 • Revenue—$18 218 million Telstra—Annual • Profit (after tax, abnormals and minorities)— Report 1999. Telstra annual report $3486m for year ending 30 June 1999 released Total dividends provided for/or paid $4247m ($0.33 per share—includes special dividend of $0.16 per share) 6 September 1999 The Telstra public share offer (T2) launched with Janelle total sale proceeds expected to amount to more than Carrigan,'Now a Telstra (T2) public share for everyone', $17 billion. Retail investors to get $0.40 discount. share offer launched The Age, Telstra shares will be payable in two instalments— 7 September 1999. the first of $4.50 (due 7 October 199) with the amount of the second to be determined mid- October. 17 September 1999 The Government announces that, following requests Geoff Elliott, from broker firms for 102 per cent of the 2.133 'Buyers rush Telstra Government too', The Australian, shares on offer in the T2 sale, it will have to scale announces broker 18 September 1999, back the allocation to brokers to 20.5 per cent or firm allocation p. 33. 437 million shares (in T2 the Government allocated just 15 per cent of shares to brokers' clients). 20 September 1999 The Australian T2 share offer opens. A total of 2.133 billion shares on offer—minimum 150 shares Australian public to new applicants, 400 shares to existing Telstra share offer opens for share holders. T2 5 October 1999 T2 institutional offer opens. Strong institutional Kevin Morrison, demand is expected as Telstra's weighting in the All 'Telstra Shop', The Institutional offer Sydney Morning Ordinaries Index after T2 expected to jump to opens Herald, 10 per cent (from 6.6 per cent after T1). 7 September 1999. 1 October 1999 The Government and Telstra issue a supplementary The Telstra 2 Share prospectus due to the announcement by the Offer, public T2 supplementary advertisement, the Government of changes to the Australian income prospectus issued Australian tax system (particularly changes to the basis for Financial Review, taxing realised capital gains). 1 October 1999.

31 Telstra Sale: Background and Chronology

Source Milestones Details Documents 7 October 1999 Telstra 2 retail share offer closes. Over 1.3 million Kevin Morrison, applications expected. 'Last- minute T2 retail share offer stampede on Telstra closes shares', The Sydney Morning Herald, 8 October 1999, p. 5. 15 October 1999 Telstra 2 institutional share offer closes. T2 institutional offer closes 17 October 1999 Retail allocation—1,418 million shares or 66.4 per Leone Wood, '$17b cent. Institutional offer—715 million shares or 33.5 baptism of fire', The T2 share allocations Sunday Age, per cent. Over 400,000 new shareholders. Average released 17 October 1999, share parcel—928 shares. pp. 1–2. 18 October 1999 Final pricing for T2 share completed $7.80 and The Telstra 2 Share $7.40. Offer, public Final price and advertisement, Final • First instalment of $4.75 per share for allocation policy price and allocation institutional investors discounted to $4.50 for policy, The Australian retail investors. Australian • Second instalment of $3.05 per share for Financial Review, institutional investors discounted to $2.90 per 18 October 1999. share for Australian retail investors. • retail investors receive 66.5 per cent of shares • domestic institutions receive 20 per cent of shares • overseas institutions receive 13.5 per cent of shares. 18 October 1999 Telstra 2 instalment receipts begin trading at Leonie Wood, 11.30am. The receipts open at $4.56 and close at 'Shakey market T2 shares traded on wrecks hope of T2 $4.51. Telstra shares drop 41 cents to close at $7.37. stock exchange stag profit', The Age, 19 October 1999. 29 October 1999 Final dividend paid $0.26 (ex-dividend date Telstra Investor 20 September 1999)—franking 38.46 per cent. Relations— Final dividend paid Dividend History Includes $0.16 special dividend. Shares purchased in the Telstra 2 Share Offer are not eligible for this dividend. 19 March 2000 The Minister for Communications, Senator Richard 'Telecommunication Alston, announces the establishment of an s Service Inquiry', Government press release by independent inquiry to assess the adequacy of announces inquiry Senator the Hon. telecommunications services in metropolitan, into regional Richard Alston, regional, rural and remote areas (as required in the Minister for telecommunications Coalition's 1998 election policy) prior to any sale of Communications,

32 Telstra Sale: Background and Chronology

Source Milestones Details Documents Telstra beyond its current level of 49 per cent Information private ownership. The inquiry will be conducted by Technology and the Arts, 19 March Mr Tim Besley AO (chair), Mr Ray Braithwaite and 2000. Ms Jane Bennett and report to Senator Alston by 30 September 2000. 28 April 2000 Interim dividend paid $0.08 (ex-dividend date Telstra Investor 20 March 2000)— ranking 49.17 per cent. Relations— Interim dividend paid Dividend History 30 August 2000 • Revenue—$19 840 million Telstra—Annual • Profit (after tax, abnormals and minorities)— Report 2000. Telstra annual report $3677m for year ending • Total dividends provided for/paid $2316 million 30 June 2000 ($0.18 per share) released 30 September 2000 The Telecommunications Service Inquiry concludes Connecting that Australians generally have adequate access to a Australia: Report of Telecommunications the range of high quality, basic and advanced Service (Besley) Telecommunication telecommunications services comparable to the Inquiry released s Service Inquiry, leading information economies of the world. The 30 September 2000. inquiry research indicates that Australians who live in metropolitan and regional centres enjoy good telecommunication services and are generally satisfied with them. However, a significant proportion of those who live and work in rural and remote Australia have concerns regarding key aspects of services which, at this stage, are not adequate. Their concerns relate primarily to: the timely installation, repair and reliability of basic telephone services; mobile phone coverage at affordable prices; and, reliable access to the Internet and data speeds generally. 27 October 2000 Final dividend paid $0.10 (ex-dividend date Telstra Investor 18 September 2000)—franking 100 per cent. Relations— Final dividend paid Dividend History

2 November 2000 The second instalment receipt payment ($3.05 or $2.90 for Australian investors) for T2 shares due. Second instalment on T2 due

33 Telstra Sale: Background and Chronology

Source Milestones Details Documents 9 November 2000 The Telstra 2 final instalment collection process 'Telstra 2 Share involved the collection of $6.31 billion from 1.48 Offer collection Instalment receipt Results', Press million holders. Of this, $2.01 billion was to be collection considered release, Minister for collected from institutional holders and $4.30 a success Finance and billion from 1.48 million retail shareholders. The Administration, the Commonwealth had received payment for 99.4 per Hon. John Fahey MP, 9 November cent of all shares issued, making the process more 2000. successful than Telstra 1 and CBA 3—both of which had similar instalment processes. In total, $6.27 billion out of the $6.31 billion due had been collected by the Telstra Instalment Receipt Trustee, on behalf of the Commonwealth. 30 November 2000 Gross proceeds from the second tranche sale of Australian National Telstra shares are estimated to be $16.04 billion. Audit Office, ANAO completes Second Tranche Australian National Audit Office (ANAO) estimates performance audit Sale of Telstra the Commonwealth's direct costs to be $169 report on T1 sale Shares, ANAO, million. The sale costs represent 1.1 per cent of sale Canberra, 2000, proceeds, a significant reduction compared to T1 p. 10. (1.9 per cent). A significant factor in the reduced sale costs was the $88.8 million (51 per cent) reduction in payments to the major Telstra 2 advisers and the selling syndicate compared to Telstra 1. 27 April 2001 Interim dividend paid $0.08 (ex-dividend date Telstra Investor 19 March 2001)—franking 100 per cent. Relations— Interim dividend paid Dividend History 15 May 2001 The Government response to the Telecommunications 'Listening and delivering on better Service Inquiry includes a funding package of $163.1 Government regional million to further improve telecommunications releases response to telecommunications services in regional, rural and remote Australia. services', Press Telecommunications release, Senator the Service Inquiry Hon. Richard Alston, Minister for Communications, Information Technology and the Arts, 15 May 2001. 29 August 2001 • Revenue—$23 086 million Telstra—Annual • Profit (after tax, abnormals and minorities)— Report 2001. Telstra annual report $4058m for year ending 30 June 2001 released Total dividends provided for/paid $2445m ($0.19 per share)

34 Telstra Sale: Background and Chronology

Source Milestones Details Documents 26 October 2001 The Treasurer reveals that the Government plans to AAP News sell the rest of Telstra in three equal instalments, Government reveals pricing it at $5.49 a share. plans to sell rest of Telstra in 3 parts 26 October 2001 Final dividend paid $0.11 (ex-dividend date Telstra Investor 17 September 2001)—franking 100 per cent. Relations— Final dividend paid Dividend History 10 November 2001 John Howard's Government re-elected for third term in Federal election. Further sale of Telstra is again a Howard Government key communications policy issue. re-elected 12 February 2002 In opening speech to the 40th Parliament the House of Governor-general states 'The Government will not Representatives, Opening of 40th Debates, 12 proceed with any further sale of Telstra until it is Parliament February 2002, satisfied that arrangements are in place to deliver Governor-General's adequate services to all Australians'. speech, p. 22. 29 April 2002 Interim dividend paid $0.11 (ex-dividend date Telstra Investor 18 March 2002)—franking 100 per cent. Relations— Interim dividend paid Dividend History 16 August 2002 Mr Dick Estens is appointed by the Government to 'Regional conduct inquiry into regional telecommunications Telecommunication Dick Estens s Inquiry', press services. Other members include Jane Bennet and appointed to hold release by Senator Ray Braithwaite. The inquiry is to report by inquiry into regional the Hon. Richard November 2002. Alston, Minister for telecommunications Communications, Information Technology and the Arts, 16 August 2002. 28 August 2002 • Revenue—$20 802 million Telstra—Annual • Profit (after tax, abnormals and minorities)— Report 2002. Telstra annual report $3661m for year ending 30 • Total dividends provided for/paid $2831m June 2002 released ($0.22 per share). 28 October 2002 Final dividend paid $0.11 (ex-dividend date Telstra Investor 16 September 2002)—franking 100 per cent. Relations— Final dividend paid Dividend History 6 November 2002 Regional Telecommunications Inquiry report is 'Connecting released. The inquiry's overall assessment is that the Regional Australia, Regional Report of the Government had responded positively and Telecommunications Regional comprehensively to the TSI findings, and that the Inquiry report Telecommunication arrangements that have been put in place are s Inquiry', released addressing the community concerns identified in the 6 November 2002. TSI report. The report makes a number of

35 Telstra Sale: Background and Chronology

Source Milestones Details Documents recommendations to improve areas where services still needed improvement and how arrangements should be put in place to provide a greater level of certainty of future ongoing benefits to regional, rural and remote communities. 30 April 2003 Interim dividend paid $0.15 (ex-dividend date Telstra Investor 17 March 2003)—franking 100 per cent. Includes Relations— Interim dividend paid Dividend History $0.03 special dividend. 25 June 2003 The Federal Government accepts all 39 'Government recommendations of the Regional response to Government Regional Telecommunications Inquiry and announces plans releases response to Telecommunication to invest $181 million in response to key Regional s Inquiry', Joint recommendations of the inquiry. Government press release, Telecommunications response available at: Senator the Hon. Inquiry Richard Alston, http://www.telinquiry.gov.au/final_report.html Minister for Communications, Information Technology and the Arts and the Hon. John Anderson MP, Minister for Transport and Regional Services, 25 June 2003. 26 June 2003 The Government introduces legislation Telstra House of (Transition to Full Private Ownership) Bill 2003 for Representatives, Government Debates, 26 June the sale of its remaining shareholding in Telstra introduces legislation 2003, Telstra (subject to taxpayers receiving a fair price for their to sell rest of Telstra (Transition to Full shares). See Bills Digest No. 10, 2003-04 Telstra Private Ownership) (Transition to Full Private Ownership) Bill 2003 by Bill 2003, First and Brendan Bailey, Department of the Parliamentary Second Reading. Library, Canberra. 21 August 2003 The Telstra (Transition to Full Private Ownership) House of Telstra sale Bill Bill 2003 passes the lower house. Coalition Representatives, Debates, 21 August passes lower house backbenchers Alby Schultz and Kay Hull abstain 2003, Telstra from the vote. (Transition to Full Private Ownership) Bill 2003, Third Reading: pp. 18 796–18 798. 27 August 2003 Telstra Corporation Chairman Bob Mansfield Telstra press announces that the Telstra Board of Directors has release, 27 August Telstra CEO 2003. reappointed Telstra Chief Executive Officer Ziggy reappointed until Switkowski for a further term until 31 December 2007 2007.

36 Telstra Sale: Background and Chronology

Source Milestones Details Documents

28 August 2003 • Revenue—$21 616 million Telstra—Annual • Profit (after tax, abnormals and minorities)— Report 2003. Telstra annual report $3429m for year ending • Total dividends provided for/paid $2474 million 30 June 2003 ($0.27 per share—includes special dividend released $0.03 cents) • Final dividend announced—$0.12 per share. 8 September 2003 Telstra releases final response to Regional Telstra response to Telecommunications Inquiry. The response includes the Regional Telstra releases final Telecommunication initiatives to further improve fixed telephone response to s Inquiry (Estens services to customers including: Regional Inquiry) Telecommunications • addressing incidents of poor service Inquiry performance and delays; • better managing congestion issues with certain types of small pair gain systems; and • streamlining new service connections for customers moving into newly-built residences.

37 Telstra Sale: Background and Chronology

Endnotes

1. Telstra was formerly known as Telecom Australia or Telecom—abbreviations and trading names for the Australian Telecommunications Commission and Australian and Overseas Telecommunications Commission. The name was changed to Telstra in 1993 (following incorporation in 1991). The trading name Telstra was used internationally from 1993 and domestically from 1995. For consistency, this chronology will generally refer to the current trading name Telstra. Telecom will be used where the context is appropriate. 2. Liberal Party of Australia, Sign posts to the Future, telecommunications policy document, February, 1993. 3. Liberal and National Parties of Australia, Better Communications, telecommunications policy document, 1996, p. 29. 4. Prime Minister, John Howard reiterated in May 2002 that there would be no further sale of Telstra until telecommunications in rural and regional areas were '…up to scratch', doorstop interview, Parliament House, Canberra, 2 May 2002. 5. Report of the Committee of Inquiry into Telecommunications Services in Australia, AGPS, Canberra, 1982. 6. Technological Change in Australia, Report of the Committee of Inquiry into Technological Change in Australia, AGPS, 1980. 7. For more information, see Holly Raiche, A History of Australian Telecommunications Policy, Cyber-space Law, the University of New South Wales, 1997, section 2.1. Available at: http://austlii.edu.au/itlaw/articles/raiche_history/telco_history.html 8. Report of the Committee of Inquiry into Telecommunications Services in Australia, op. cit., p. 31. 9. ibid, p. 233. 10. ibid, p. 8. 11. For more information, see Holly Raiche, A History of Australian Telecommunications Policy, Cyber-space Law, the University of New South Wales, 1997, section 2.2. Available at: http://austlii.edu.au/itlaw/articles/raiche_history/telco_history.html 12. See House of Representatives, Debates, 25 May 1988. 13. ibid., 26 May 1988. 14. Comments on radio program, 12 February 1990. 15. Peter Botsman, ABC Lateline, 2 March 1993. 16. Bob Collins, ABC Lateline, 2 March 1993. 17. See Liberal and National parties of Australia, Better Communications, Telecommunications policy document, 1996, p. 29. 18. ABC Lateline, 22 June 1994.

38 Telstra Sale: Background and Chronology

19. John Howard, Press conference, Sydney, 23 January 1996. 20. Liberal Party of Australia, Better Communications, 1996, op. cit. 21. Telstra: To Sell or not to Sell? Report of the Senate Environment, Recreation, Communication and the Arts References Committee, September, 1996, p. v. 22. Geoff Elliot,' Instant profits from Telstra', The Canberra Times, 18 November 1997. 23. On payment by investors of the first instalment, legal title to the Telstra shares was transferred by the Commonwealth to TIRT until payment of the final instalment, when the shareholding was transferred to the instalment receipt holder. The TIRT would hold the Telstra shares on trust for the benefit of (a) the Commonwealth, as security for the unpaid instalments; and (b) the investors, in the remainder. 24. Anthony Hughes, 'Too early for a special dividend', The Sydney Morning Herald, p. 28. 25. John Howard, closing address to the Liberal Party National Conference, reported by Michael Millet, 'Howard's $45 bn war chest', The Sydney Morning Herald, 16 March 1998. 26. Coalition policy statement, Communications: Making Australia Stronger, September 1998. 27. Report by the Senate Environment, Communications, Information Technology and the Arts Legislation Committee into Telstra (Transition to Full Private Ownership) Bill 1998 and associated Bills. Available at: http://www.aph.gov.au/Senate/committee/history/index.htm 28. Leonie Wood, 'Shakey market wrecks hope of T2 stag profits', The Age, 19 October 1999. 29. Australian National Audit Office, Sale of One-third of Telstra, Canberra, 1998. Available at: http://www.anao.gov.au/WebSite.nsf/Publications/4A256AE90015F69B4A25690400035094 30. Australian National Audit Office, Second Tranche Sale of Telstra Shares, 2000. Available at: http://www.anao.gov.au/WebSite.nsf/Publications/4A256AE90015F69BCA2569A60011FE70 31. Comment by Tim Besley, 7.30 Report, ABC 5 June 2000. Also see p. 9 of the report which stated that under its terms of reference “… the Inquiry was not required to address—and did not address at any time—issues relating to the further sale of Telstra.” 32. Connecting Australia, Report of the Telecommunications Service Inquiry, p. 165. Available at: http://www.telinquiry.gov.au/final_report.html 33. Regional Telecommunications Inquiry, Terms of Reference, 16 August 2002. Copy available at: http://www.telinquiry.gov.au/final_report.html 34. Connecting Regional Australia, Report of the Regional Telecommunications Inquiry, p. xi. Available at: http://www.telinquiry.gov.au/final_report.html 35. Brendan Nelson, Second Reading Speech, 26 June 2003. 36. Bloomberg.com.au A summary of the Telstra share price for the last five years is available at:http://quote.bloomberg.com/cgi- bin/gcenter.cgi?iquote=TLS&PERIOD=5Y&equote1=&equote2=&equote3=&EXCH=AU& T=gcenter_au.ht&x=28&y=7

39 Telstra Sale: Background and Chronology

37 'Listening and delivering on better regional telecommunications services', Press release, Senator the Hon. Richard Alston, Minister for Communications, Information Technology and the Arts, 15 May 2001. 38. 'Government response to Regional Telecommunications Inquiry', Joint press release, Senator the Hon. Richard Alston, Minister for Communications, Information Technology and the Arts and the Hon. John Anderson MP, Minister for Transport and Regional Services, 25 June 2003.

40