Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

My question is to Senator Minchin, the Minister for Finance and Administration. Does the minister recall saying yesterday that Telstra’s ‘dividend policy is entirely a matter for the board’? Given this claim, can the minister explain the numerous recent news reports of the government demanding that Telstra maintain dividend payments at forecast levels for T3? Doesn’t the government’s majority stake in Telstra give it the power to appoint and sack board members? Is it also true that the government has coerced the board to keep Telstra dividends at forecast levels to prop up the price for the sale of T3? Won’t Telstra again be forced to borrow to pay these inflated dividends? In light of this, how can the minister possibly suggest that the government played no part in Telstra committing to pay dividends that the financial experts at Moody’s and Standard and Poor’s describe as unsustainable?

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

In response to that question, I reiterate that it is indeed the board which has the sole authority in relation to the dividend policy of the company. It is a matter that they take very seriously and they do so in accordance with Australia’s corporations laws. It is certainly the case—and it is something that we made very clear in the public arena—that, in relation to the question of whether or not the government proceeded with any further retail offer of Telstra at the current time, the government as a potential seller of shares would require before it could proceed, as a precondition to a further offer of shares, clarity in relation to dividend policy going forward and some understanding from the company as to the nature of the commentary that it might or might not be making with respect to the regulatory arrangements during an offer period.

Those preconditions for the government to proceed were of course conveyed to Telstra, indicating that we were in the situation where the clear advice to us from our professional advisers was that we should not go to the market unless there were those preconditions. They were entirely, of course, a matter for the board. It was reiterated in my meetings with Mr McGauchie that these were matters entirely for the board. It was my task to convey to Mr McGauchie, representing the board, that we could not proceed if they were not in a position to provide that clarity in relation to dividend policy or indeed to provide assurances to the government as to the nature of their commentary on regulatory matters during the offer period. The board considered those two matters.

The board then, of its own volition and in accordance with its authority, issued a statement based on its financial advice and its perspective on the position of the company that it would be paying the same dividend that it has been paying—28c per share in 2007—but it could not give specific guidance in relation to 2008. The government received requisite assurances with respect to the company’s position on its commentary on regulatory matters during the offer period. On that basis, the government felt that it was in a position to make the announcement that it made some 10 days ago that it would proceed with its offer. I reiterate that this is a matter entirely for the board. Indeed, what Senator Conroy is at the very least implying is an utter slur on the board—that the board has ignored its corporate responsibilities by being coerced by the government. That is a slur on every single one of the board members at Telstra, and Senator Conroy should withdraw it.

Stephen Conroy (Victoria, Australian Labor Party, Deputy Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

Mr President, I ask a supplementary question. Does the minister recall the secret briefing document that Telstra management provided to the government in August last year? Didn’t Telstra admit in this document that its past practice of borrowing to pay dividends was unsustainable in the future? Given Telstra’s stated opposition to borrowing to pay dividends, is the minister seriously suggesting that the government’s public heavying of the Telstra board did not contribute to its U-turn on this issue?

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

I utterly and totally deny the implication in Senator Conroy’s question. The matter of the dividends of the company is absolutely a matter for the board and it would be irresponsible of the board to act in any other way than in accordance with the interests of all shareholders of this company and its legal obligations. The company, I would note, does have a very healthy balance sheet and therefore is in a position, according to the company’s testimony to us, to continue to pay this 28c a share dividend, at least for 2007, and many commentators have recognised that fact. The company has indicated that, going forward, its future dividend policy will be a matter of the performance of the company and it will make a decision accordingly.