Telstra shares took the pounding we warned about last week yesterday in the wake of the indecisive election result and fears that the $11 billion NBN deal might be in danger.
The shares fell more than 6% to a record low of $2.76 as prospects of a hung parliament cast doubts about the future of its broadband plans and the wider telecommunications industry.
Telstra shares ended at $2.77, down 19c, and on an unheard of price earnings ratio of more than 10 times the 28c a share dividend.
Seeing the stock went ex the 14c a share final dividend yesterday, the real fall was 5c a share.
Normally Telstra shares would be expected to rise to recover the impact of the dividend payment.
The overall market was barely in the red at the end, down less than 2 points.
While three of what could be five independent MPs who could decide which party takes power favour government-assisted telecommunications, they have not yet announced which party they will support.
The Coalition has promised to scrap the national broadband project in favour of incentives to encourage businesses to expand wireless broadband into regional areas, whereas Labor favours a government-funded project that would deliver fast fibre broadband to 93% of the population.
But the Opposition and leader Tony Abbott were making noises yesterday about changing their policy to try and accommodate the independents.
The Labor Government’s NBN policy includes the $11 billion deal to buy the copper wire bits of Telstra, the same ones that are losing nearly 1,000 customers a day and losing hundreds of millions of dollars of revenue and profits a year at the moment.
If the NBN deal doesn’t happen, that big dividend is in trouble.
The wider market was also mixed to weaker, being impacted by the uncertainty after the voting on Saturday and Friday’s fall on US and European markets.
The market absorbed two other big developments.
The first was the successful voting on the merging of Newcrest and Lihir Gold to produce the world’s 5th largest gold company and one that will dominate the sector here in this country.
Lihir shareholders okayed the deal, valued at more than $10 billion, at a vote in Port Moresby yesterday, thus clearing the way for the integration to start once final court approvals are granted.
Newcrest operates in the massive Telfer copper-gold mine in WA’s Pilbara region and has mines in NSW (Cadia) and in PNG and a couple of other places.
With Lihir, which was created 15 years ago to develop the namesake gold deposit in Lihir Island Papua New Guinea, the newly merged company will have mining operations on five continents.
Newcrest was offering one share for every 8.43 Lihir shares plus cash of 22.5c per Lihir share. The takeover bid was announced on March 31.
Lihir chairman Ross Garnaut told shareholders that the company had received "significant interest" from other suitors since March but none resulted in a formal bid.
The new Newcrest will have operations in five countries and move into the top-five producers of gold worldwide, a list most recently dominated by South African and North American based companies.
The other development was speculation about Fosters and its brewing arm, CUB.
London reports at the weekend said SABMiller, the world’s second biggest brewer, was eyeing CUB.
As a result, Fosters shares jumped to their highest level since November 2008, closing on the day’s high of $6.26, up 44c, or 7.5% on the continuing speculation.
Brewing giant SABMiller is reportedly plotting a STG7 billion ($A12.22 billion) takeover of Australia’s largest brewer, Carlton and United Breweries.
Foster’s is due to hold its full year results briefing today after releasing the results first thing.
Yesterday it told the ASX, in answer to a query, that it knew nothing of the reports and there were no changes in its guidance ahead of today’s announcement.
