Federal fund slashes stake in Telstra

SYDNEY: Telstra shares have fallen almost 4 per cent after the federal Government's Future Fund sold more than one-third of its stake yesterday.

They were down A13c, or 3.56 per cent, to A$3.52 ($4.38) at 1pm Sydney time. Just over 880 million shares had changed hands, worth A$3.07 billion.

Total market turnover was 2.6 billion shares, worth A$6.6 billion.

The fund sold 684.4 million of its Telstra shares to institutional investors at A$3.47 a share, a 5 per cent discount on Thursday's closing price.

The Future Fund board said on Thursday that it viewed market conditions as conducive to a partial selldown of its holding. On Thursday, Telstra shares had gained A40c, or 13 per cent, since early June.

"The Future Fund move sends the signal that they think Telstra is fully valued and might suggest they plan to sell more over time," said William Seddon, of White Funds Management in Sydney.

The sale cuts the Government-owned fund's stake by a third to 10.9 per cent as Telstra chief executive David Thodey seeks to participate in a A$43 billion state-led project to build a faster nationwide internet network. The Future Fund said the sale was part a strategy of reducing its holding.

The last of the Government's Telstra holding was transferred to the fund in February 2007 after completion of the third and final tranche of share sales to the public in November 2006.

Telstra last week reported that second-half profit climbed 22 per cent to A$2.16 billion in the six months to June 30, as mobile phones overtook fixed-line services for the first time.

- AAP, BLOOMBERG