CSL delay may stall Telstra dividend

Telstra’s sale of its stake in Asian mobile service provider CSL as part of a $US2.43 billion deal is running late with Hong Kong’s competition regulator yet to approve the move.
Nanjing Night Net

The late approval may delay Telstra’s plan to tell shareholders whether or not dividend payments will be boosted with the billions of dollars reaped from recent assets, including its Sensis directories business.

Telstra announced it would offload the 76.4 per cent stake in CSL last December to rival Hong Kong Telecom (HKT) in a move that would reap the telco around $2 billion.

The deal was due to be finalised by the first quarter of 2014, which ended on Monday. Telstra chief financial officer Andy Penn said at the time he would delay revealing the company’s plan for the extra funds until after the regulator had approved the deal.

Hong Kong’s Office of the Communications Authority (OFCA), which is the main regulator of telecommunications activity in the island state, extended its window for submissions in January by a week and a half in response to requests from rival telcos.

“To Telstra’s knowledge the reason for this [delay] is due process,” a Telstra spokeswoman said. “For example, OFCA allowed additional time for public submissions in response to OFCA’s Consultation Paper until after the Lunar New Year holiday period.”

The deal has faced opposition from some of Asia’s most powerful telecommunications companies. In its submission, China Mobile’s Hong Kong subsidiary said the merger would create a dominant player in the market.

China Mobile is one of the world’s biggest telecommunications providers and is controlled by the Chinese government.

“HKT/CSL will become a giant all-in-one service provider of fixed telephone service, fixed broadband service, 2G/3G/4G mobile service and even wi-fi service,” it said. “HKT/CSL might become a dominant or near-dominant operator in the combined fixed and mobile services market.”

Of key concern to other players in the market is the risk that the merged telco will have far more mobile spectrum than its rivals, the electronic airspace that is vital for broadcast technologies like mobile phones.

But the merger hasn’t attracted universal opposition from rivals. Analysts believe this is because a merging of CSL and HKT would slow down the price war in Hong Kong that has had an impact on mobile earnings.

Hutchison Telephone Company (HTCL) told the OFCA that Hong Kong had one of the most competitive mobile markets in the world.

“HTCL does not see that position changing if the proposed acquisition goes ahead,” it said in its submission. “It would be appropriate for the CA to give its consent to the proposed acquisition.”

Analysts have said the sales have inflated Telstra’s warchest to between $5 billion and $7 billion. This can be used to increase the dividend paid to shareholders, invest in Telstra’s Asian growth strategy through acquisitions or initiate a share buyback scheme.

Telstra has told shareholders it will not reveal its plans for the $454 million it received from Californian private equity fund Platinum Equity for a 70 per cent stake in Sensis and other sales until after the CSL transaction is completed.

This story Administrator ready to work first appeared on Nanjing Night Net.