Investment giant urges shareholders to protest Telstra beak-up

The chairman of Australia’s largest listed investment company has urged shareholders to protest against the Government’s plans to force Telstra to separate its wholesale and retail businesses, claiming the telco giant is entitled to get fair value for its assets.

In a highly unusual step, the listed investment manager Australian Foundation Investment Company urged shareholders at yesterday’s annual general meeting in Melbourne to take a copy of a specially-prepared pro-forma letter and send it to Prime Minster Kevin Rudd and/or their local political representative.

“At the time I acquired my shares in Telstra there was no prospect of the Government taking such unprecedented steps to attack the company and its shareholders,” the letter says.

“The Government has reaped the benefit of selling its interests in the company and having done so it now seeks to seriously damage the interests of all those who acquired their shares in good faith without giving fair and just compensation.”

AFIC, which has almost $165 million invested in Telstra, is one of Australia’s most conservative investment companies and hardly has a reputation as an activist investor.

But long-serving chairman Bruce Teele has heavily criticised the Government’s decision to force Telstra to break itself up. He has questioned whether structural separation has worked anywhere else in the world, and also argues that the decision could scare off foreign investors worried about sovereign risk.

Teele has also questioned whether the move may simply create a new monopolistic player in the telco market.

”We paid good money for something that we value and we don’t think it’s fair to have that taken away without proper compensation,” Teele told the AGM.

“Any agreement with the Government needs to be in the interest of shareholders.”

AFIC’s very public stance against the Telstra deal comes two weeks after a group of eight fund manager who control around 500 million Telstra shares – including Investors Mutual, BT and 452 Capital – wrote to Telstra chair Catherine Livingstone to express dismay at the plan.