T3: Telstra Final Call

Submitted by Marco on 7 November, 2006 - 21:38

Telstra Final Call

Telstra T3: You've got two days left to submit your T3 Application form (attached to your T3 prospectus)which is due by 4pm this Thursday. It's probably too late to rely on Australia Post to deliver your forms on time: play it safe and submit your forms to your nearest Commonwealth Bank or you can simply apply online. For many people investing in T3 is a psychological hurdle, especially those who bought into T2 at $7.40. Terry Campbell (the chairman of the banking team advising the government on the T3 sale) has admitted that applications for the $8 billion T3 retail offer were lower than expected.

Retail investors are guaranteed at least 2000 T3 shares. Existing Telstra shareholders, however, are guaranteed the greater of 3000 T3 shares or one T3 share for every two Telstra shares they already own. T3 investors will initially receive instalment receipts for each share they are allocated. These receipts will be converted to full Telstra shares once the second instalment is paid in May 2008.Market research conducted for the T3 Sale Taskforce have expected that the T3 general retail offer to raise around $1.5 billion. Campbell said that "What we're finding is that perhaps the man in the street, they're confused and the applications are a little less than we might have expected originally. But that's more than being offset by higher demand from the wealthy end of the market - the higher net-worth investors." A spokesperson for the T3 Sale Taskforce said that the government remains confident that the retail component of the T3 offer would raise between $5 billion and $6 billion. Last month $4 billion worth of the offer was signed up by stockbrokers and $435 million through the Japanese offer. $2 billion worth of T3 shares have been set aside for fund managers who can bid for stock in a book-build running from November 15 to 17. The book-build will determine the price of the T3 stock. In T1 and T2, the second instalment was less than the first instalment. There are expectations that this will occur in T3 which means the total price will be less than $4.

It is interesting to note that the Telstra share price has risen about 10 percent in the last month, but it is still about 5 percent lower compared to a year back. Two years back and Telstra was at $5 a share. Mr Campbell attributed the share price rise with a rerating of telecommunications companies in other parts of the world. Mr Campbell said that, " Telcos have risen by 15 to 20 per cent so far this year." "That means that the overseas institutions are looking at telcos and they're saying, 'What? Gosh, Telstra's still pretty low'. "And, at the same time, we've had the roadshows going through the North American and European financial centres, and there's been quite significant buying following on from those roadshows."

For those interested, here is the slightly controversial side of the Telstra sale: The Finance Department had some figures tabled in parliament which reveal that 21 consulting companies are sharing $77,377,598 in helping promote and sell T3. Link Market Services (an investor service centre) is receiving $13.5 million to process share applications. Their contract started in June and ends in December. Salmat Document Management Solutions gets $8.5 million for mail services for just six months. A consortium consisting of the following stockbrokers: ABN Amro Rothschild, Goldman Sachs JBWere and UBS is being paid $12.7 million for providing project management services. The contract started in November 2005 and runs until March next year. The Commonwealth Bank gets over $5 million for project management and distribution services in two separate six-month contracts. Law firm, firm Freehills is providing advice for $5,375,000. For $12 million, Stellar Call Centres will run hotlines on the T3 share sale. Commissions to stockbrokers will amount to $37 million. Stockbrokers are given a 1.25 percent commission for each T3 stock sold – more than double than what was paid in the 1999 T2 sale. This may also explain why I received a prospectus on from my stockbroker (unasked) as well as a second copy that I actually ordered from the T3 sale website.

The retail offer for T3 will close on November 9. Telstra will have their AGM on November 14. The Institutional bookbuild for Telstra will occur on November 15-17 where investment banks submit bids on how many shares they would buy and at what price they are willing to pay. Using this process the T3 sale organizers will determine the price of the second instalment. The ASX listing of the T3 shares will occur on November 20.

Telstra Corporation Limited is listed on the Australian Stock Exchange (ASX) under stock code TLS. The Australian government is selling a $8 billion portion of the Australian Telecommunications giant in a package called Telstra 3 or T3 for short. You can view their investor website here. TLS was first listed on the ASX on 17 November, 1997. Telstra (TLS) is a telecommunications Carrier. Provision of telecommunications and information services, including mobiles, internet, and pay television. Find out the meaning of the recommendations in this primer. Browse for other broker recommendations. Other Telstra stock recommendations and news. Check your charts and good luck with your share trading!