Telstra move slated by the AFI

The plans for the Federal Government to force the structural separation of Telstra Corp has come under heavy criticism by the Melbourne-based Australian Foundation Investment Co (AFI), which is the largest and oldest listed investment company in Australia.

Bruce Teele, the chairman of the AFI and the long standing leading member of the conservative business community in Melbourne, questioned the success of the Federal Governments strategy in other markets and also said that Telstra should receive a fair price for its assets, during the company’s annual meeting in Melbourne recently.

The loyal shareholders at the investment company were also asked by Mr Teele to contact their elected representative and let them know what their views were. He also advised that there may be a danger of coecive favouritism by the government during his presentation to shareholders at the AGM.

Mr Teele advised “Government’s action raises the question of sovereign risk for overseas investors” and that agreement with the Government “needs to be in the interest of shareholders.”

He also questioned where the cash flow would come from in the future and whether this kind of strategy for separation had worked anywhere else in the world.

Plans to set up a National Broadband Network also carried the risk of a new monopoly being created warned Teele.

A number of Sydney-based institutions have already raised their concerns regarding recent events and the AFI is just the latest of the major shareholders to comment on these issues.

Mr Teele was as cautious as others in the group with regards to what was ahead for the group when talking about the outlook for the company in 2010.

He said that the “Monetary and fiscal stimulus is helping the Australian economy, however Australia is likely to be facing higher interest rates next calendar year which may impact the sustainability of growth.”

Source – IB Times