news blog from Delaine

UPDATE 2-Telstra shareholders back $11 bln govt network handover

* Shares rally 1.6 pct in weak market (Recasts with vote outcome)By Sonali PaulMELBOURNE, Oct 18 (Reuters) - Telstra Corp shareholders on Tuesday approved a plan to hand over the company’s fixed-line phone network to the Australian government for $11 billion, transforming the nation’s dominant phone company into a pure telecoms retailer.The deal, which marks the biggest overhaul of Australia’s telecoms industry since Telstra was privatised 14 years ago, still needs approval from the country’s competition watchdog.The alternative to the handover — competing against Australia’s new state-owned high-speed broadband company, losing access to new digital spectrum and nursing a home phone network with falling revenues — would have left Telstra $5 billion worse off, an independent expert advised shareholders.”Any company that can sell a structurally challenged business in return for a high yielding government bond is a great outcome for shareholders,” said Rhett Kessler, a portfolio manager at Pengana Australian Equities Core Fund, which voted in favour of the deal.The company said any changes to the deal to meet concerns raised by the Australian Competition and Consumer Commission were not expected to be material, but if they were, it would need a fresh shareholder vote.Telstra executives declined to put a figure on what would constitute a “material” change.Telstra Chairman Catherine Livingstone said the company would consider returning capital to shareholders after the deal with the government’s new A$38 billion ($39 billion) high-speed fibre network goes through.In the meantime, she reassured investors that the company would hold its dividend steady at 28 cents this year and next, which on Tuesday’s trade implied a yield of nearly 9 percent.Shares in Telstra rose 1.6 percent to A$3.16 in a broader market that was down on Tuesday, as investors turned to stocks with healthy dividend.”The dividend’s only good if it’s sustainable, and we think it’s sustainable,” Kessler said.Shareholders had been eager to vote on the plan to spin off Telstra’s fixed-line assets, looking to end two years of uncertainty sparked by the government’s plan to shake up the industry which sent the company’s shares to record lows.As expected, proxy votes revealed at the annual meeting showed shareholders were “significantly in favour” of the deal, Livingstone said.The Labor government’s plan is to wire up the whole country to high-speed services and provide a neutral platform on which rival firms, including Telstra, would compete for customers.”This AGM comes at a historic moment, because we are poised to decide on a transaction, a transaction that will deliver long-term financial and strategic benefits for our company,” Livingstone told shareholders.The conservative Coalition, which would trounce Labor if an election were held today, is opposed to the national broadband network (NBN) and has said it would review the rollout if it comes to power.To protect itself against a change of policy, the network deal includes compensation of up to A$500 million to Telstra if the rollout ceases after reaching at least 20 percent of its coverage target. ($1 = 0.976 Australian dollars)