Telstra sweeteners assessed in Canberra

CANBERRA - The Australian Government is surveying householders on whether they would buy shares in the planned A$33.8 billion ($36.8 billion) sale of its remaining stake in Telstra if they were offered discounts and other incentives.

Individuals were asked if they would be interested in buying shares at a discount of up to 40Ac a share compared with the price paid by institutions, according to people surveyed.

Other incentives being tested include allowing investors to pay in instalments, effectively boosting the dividend yield, or giving investors who hold their stock for a year one free share for every 20 they buy.

The inducements may be needed to persuade investors to buy Telstra stock, which has slumped 35 per cent since the last Government sale in October 1999.

With overseas investors owning just 7 per cent of stock in the Melbourne-based company, the Government is relying on demand at home to complete the sale in a single offer.

"The Government has to do everything it can to drum up demand given the size of the sale," said Mark Nathan, at ABN Amro Asset Management in Sydney. "Attracting mum-and-dad investors will be an important part of that."

The possible sweeteners are being tested in market research by Melbourne firm DBM Consultants.

The Government sold 33 per cent of Telstra in a A$14.3 billion initial public offering in 1997. It sold a further 16.6 per cent for A$16 billion two years later.

- BLOOMBERG