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SYDNEY - Telstra's new stock rose as investors who missed out on the Australian Government's A$15.5 billion offering chased the highest dividend available among the nation's 200 biggest stocks.
The T3 instalment warrants rose throughout the day to close at $2.18, after individuals initially paid A$2 a share, a A10c discount to institutional investors.
Goldman Sachs JBWere chief executive officer Terry Campbell, who led the team of bankers that sold the 35 per cent stake, said: "The offer left some unsatisfied demand in the market."
The stock will pay a yield of 14 per cent this year, more than three times the average offered by Australia's benchmark S&P/ASX 200 index.
Prime Minister John Howard retreated from plans to sell the Government's entire stake in Melbourne-based Telstra, the nation's biggest telephone company, after a slump in earnings and a clash with management sent the shares to a record low in August.
Inducements, including the dividend yield and discounted stock, attracted buyers, averting a threatened scrapping of the sale.
The sale ends the Government's control of Telstra, nine years after it first sold stock, and removes its conflict as regulator and owner of the phone company.
To stoke demand for Telstra stock, which has slumped more than 50 per cent since the previous offer in 1999, the Government allowed investors to pay for their shares in two instalments.
A second instalment of A$1.60 is payable on May 29, 2008. In an added inducement, investors who hold the stock until then will receive one free share for every 25 they bought.
Sixty per cent of the 4.25 billion shares went to individual investors.
The offer increased the number of Telstra shareholders by at least 100,000 to 1.65 million, more than one-in-10 Australian adults, making it the nation's most widely held stock.
The Government sold 33 per cent of Telstra in a A$14.2 billion initial public offering in 1997 and a 16.6 per cent stake for A$16 billion two years later.
The Government's remaining 17 per cent of Telstra will be placed in the Future Fund, an investment pool run to cover pension liabilities for politicians, defence workers and bureaucrats.
The shares will be placed in escrow for two years, after which they can be sold. An exception to the lock-up will be allowed after six months if a "cornerstone" investor agrees to buy at least 3 per cent of the company.
Telstra chief executive Sol Trujillo's cuts to profit forecasts, blamed on regulations, have soured Government relations and pummelled investor confidence. The stock has fallen 28 per cent since he was appointed in July last year.
Trujillo has warned the company's value is being "destroyed" by rules giving rivals below-cost access to its copper wires and optic fibre network.
Howard blamed Telstra's management for talking down the company's prospects and said he would not be "blackmailed" into easing regulations. In July, Minchin warned the sale might not proceed because of the tensions.
The Government ceding control is unlikely to end the feud.
Last week, it used its majority holding to appoint Geoff Cousins, a former Howard adviser, to the board.
Telstra objected, saying he may lack independence.
- BLOOMBERG
