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Five good reasons why the government should not own half of Telstra

By Richard Alston - posted Wednesday, 9 July 2003

Kenneth Davidson (The Age, 30 June 2003) asked the question: "Why does the Howard Government want to sell the remaining 50.1 per cent of Telstra?" The answer is that it is in Australia's national interest - it is in the interest of Telstra itself, its 1.8 million shareholders, the wider telecommunications sector and, most importantly, the Australian public.

The question I would pose to Davidson, and to the Labor Party, is: "Why do you insist on the government running a phone company?" Those opposing the sale of Telstra must explain:

1. How would they resolve the extraordinary conflict of interest whereby the government on the one hand should be promoting maximum competition and thereby lower prices and better service quality, while at the same time it has a very powerful incentive to maximise returns from its $30 billion stake in the largest player in the industry?


2. In an increasingly global telecommunications market, how is Telstra expected to compete effectively when the odds are stacked against it because, unlike its competitors, it is unable to issue shares for capital raising purposes?

3. How can Telstra's 1.8 million shareholders be assured that their shares will not be devalued by the threat of government meddling and politically motivated decisions?

4. Why should all Australians continue to be saddled with the remaining $32 billion of the $96 billion in federal government debt that Labor left them with?

5. Why should all Australian taxpayers continue to have no choice but to be exposed to the vagaries of the sharemarket? In fact if Labor, which privatised almost everything that moved when in government, had not just said no some years ago, taxpayers would already be close to $30 billion better off.

By selling Telstra the government would overcome the problems of the present ownership structure. This would allow Telstra to get on with the business of operating one of the world's leading phone companies, and would leave the government, free of any conflict of interest, to concentrate on maintaining a robust, world-class regulatory framework.

Davidson glibly claims that when Telstra is fully privatised, Australia "will be worse off because Telstra will put the interests of the shareholders before the national interest". He provides no evidence for this bald assertion, because there is none.


Telstra is not a public service organisation. Since 1991, it has been required by law to operate on a fully commercial basis, which includes the obligation imposed on all company directors through corporations law to act in the best interests of their shareholders.

Telstra directors already do so, at times quite stridently and vigorously rejecting any overarching social obligation.

It is disingenuous to pretend that Telstra is a warm and cuddly teddy bear that will suddenly transmogrify into a raging commercial gorilla if fully privatised. Nothing changes with partial privatisation, because ownership is not the issue. You don't have to own an asset to regulate it.

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This article was first published in The Age on 4 July 2003.

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About the Author

Hon. Senator Richard Alston was Minister for Communications, Information Technology and the Arts and Deputy Leader of the Government in the Senate from 1996-2003. He is a Senator for Victoria.

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