Brokers grab $4.5b of Telstra shares

SYDNEY - The Australian Government sold A$4 billion ($4.54 billion) of stock in Telstra through stockbrokers and financial planners, completing the first stage of its exit as an investor in the nation's biggest phone company.

The Government allocated 1.1 billion shares to brokers who applied on behalf of their retail clients after receiving applications for 1.6 billion shares, Finance Minister Nick Minchin said.

The remaining A$4 billion of stock will be sold to retail and institutional investors in Australia and Japan ahead of the shares' scheduled listing on November 20.

The Government, which owns more than half of Telstra, is offering inducements such as a discount and free shares as it tries to sell a stock that has plunged more than 50 per cent since its last offering in 1999.

Investors in the share sale, dubbed T3, get a dividend yield of 14 per cent, more than triple the 3.8 per cent return of Australia's benchmark S&P/ASX 200 Index.

"The yield was always going to attract retail investors," said Atul Lele, at White Funds Management in Sydney.

Investors will pay a first instalment of A$2 a share, a A10c discount to institutions, while keeping the entitlement to a full dividend payment of A28c for the year ending June 30, 2007. A second instalment, which will be priced on November 20, will be payable in 18 months.

- BLOOMBERG