Telstra

I have long opposed the privatisation of Telstra. There are, in my view, too many natural monopoly elements involved in the non-retail part of Telstra and the effective provision of an efficient, low cost message market in Australia is an overriding social priority. Such provision is a much more effective way of bringing together our geographically dispersed population than ad hoc regional programs based on National Party pork-barrelling.

But with the Government's current stated policy intention to sell off a further $8 billion of its 51.8% holding and to place the remaining $24.4 billion into the Future Fund no-one is now interested in arguments that involve retaining or to taking back into public ownership some of Telstra.

Telstra will become a pure regulated private firm which should mean that government policy will be primarily based on consumer interests rather than considerations of dividend income or the income to be gained by increasing the extent of its privatisation. (By the way, placing a large slab of stock with the Future Fund seems almost inconsistent with the privatisation idea and with intended non-political management of the FF).

Selling at a share price of only around $3-50 suggests that the government expects to be increasingly tough on Telstra in terms of ACCC regulatory environment. Telstra will not enjoy the types of anticipated monopoly powers it was anticipated to have when T2 was floated when shares fetched $7-40. Joshua Gans points out that purchases of shares at this price might perhaps be seen as deserving of compensation given the changed regulatory view but that this will not happen with the current moves. Telstra will now be purchased for its utility income-generating prospects not because it is seen as a vehicle for growth.

Now should I buy a few thousand Telstra shares? They are good buying if early next week an over-supply and FF-overhang panic drives the pre-issue stock price to around $3 and if Telstra maintains its current dividend payout.