BACKGROUND TO THE INQUIRY
On 21 May 1996 the Senate referred the Telstra (Dilution of Public
Ownership) Bill 1996 to the Environment, Recreation, Communications
and the Arts References Committee for inquiry.
The main reasons the government proposed the partial sale was to:
provide a means and strategy for reducing public debt;
expose Telstra to the scrutiny of the marketplace - both domestically
and internationally; and
allow $1 billion to be devoted to the Natural Heritage Trust of Australia,
to maintain and replenish Australia's environmental infrastructure. [1]
The Committee tabled its report in the Senate on 9 September 1996.
The majority of the Committee members recommended that Telstra remain
in full public ownership, while a minority report of government members
recommended that the Bill be passed in its present form.
On 11 December 1996 the Telstra (Dilution of Public Ownership) Bill
1996 was passed, with amendment, by the Senate. On the same day the
Senate referred to the Economics Legislation Committee the matter of
public equity in Telstra Corporation Limited as provided for in the
Telstra (Dilution of Public Ownership) Bill 1996. The Telstra Bill included
an amendment to its commencement provisions which ensured the resultant
Act would not be proclaimed until 1 May 1997.
Senator Harradine moved the amendment concerning delay in proclamation
of the Act in order to allow time for consideration of his proposal
that the partial privatisation of Telstra be undertaken via issue of
redeemable preference shares or other options. Division 4 of the Telstra
(Dilution of Public Ownership) Bill 1996 provides amongst other things
for the issue of redeemable preference shares should the government
choose to follow this policy option. Accordingly, in conjunction with
his amendment to delay proclamation of the Telstra (Dilution of Public
Ownership) Bill 1996, Senator Harradine moved that:
....in view of the amendment made to the commencement provisions
of the bill, the matter of public equity in Telstra Corporation Limited
as provided for in the Telstra (Dilution of Public Ownership) Bill
1996, be referred to the Economics Legislation Committee for inquiry
and report by 26 March 1997, with particular reference to the following
matter:
The suitability of redeemable preference shares or other capital raising
options for public participation by way of investment in Telstra, other
than ordinary voting shares. [2]
Senator Harradine incorporated in Hansard an assessment that
one-third sale of Telstra capitalised as ordinary shares would eventually
be worth over $15 billion, hence an issue of redeemable preference shares
by Telstra could easily raise $8 billion.
The Committee advertised its inquiry in The Financial Review
of 20 December 1996 and requested that written submissions be provided
by 5 February 1997. A total of eight submissions were made to the inquiry
and are listed in appendix 1. The Committee conducted one public hearing
in Sydney and heard evidence from six organisations. Details of the
public hearing appear at appendix 2.
Footnotes
[1] Liberal & National Parties Policy
1996 and Submission No. 1 Telstra Corporation Limited, p. 2
[2] Journals of the Senate, Wednesday,
11 December 1996, p. 1270