Telstra says its board is concerned about the company’s ‘undervalued’ share price and intends to maintain its 28 Australian cent dividend for this year and next year, according to statements at Friday’s AGM in Melbourne.
But its biggest shareholder, the Future Fund, seems to be on another planet, it seems to be actively undermining Telstra, which is the Fund’s biggest investment.
The attempts at confidence building by the board at the AGM were however overtaken by the shock news that The Future Fund voted against three major resolutions put to the AGM.
The Future Fund is Telstra’s biggest shareholder, with a 9.9% stake in the company.
Among resolutions to be put to the meeting, shareholders were asked to endorse the company’s remuneration report, changes to Telstra’s constitution, and the election of director Nora Scheinkestel.
Despite the opposition, the company’s resolutions won approval, with the remuneration report receiving 76.7% support and Ms Scheinkestel receiving 79% support.
The resolution to change the telco’s constitution to reduce the number of directors received 77.9% support.
The fund confirmed after the meeting that it had voted against all three resolutions put to the meeting, saying the decision to do so was based on its voting policy and principles that were designed to protect and enhance shareholder value.
It said its board of guardians believed Telstra would benefit from increasing the level of telecommunications experience among its non-executive directors, particularly given the very significant changes in Telstra’s operations that would have a lasting impact on shareholder value.
But according to commentators, the reason for the opposition was the approach of Fund chairman, David Murray.
Murray hasn’t been afraid to attack Telstra in public and the management. He has given several interviews, especially in the Financial Review in which he has expressed his criticisms of the company and his negotiations with the government in connection with the NBN and structural separation.
Now it’s escalated with some commentators claiming and the Fund is upset that Telstra won’t give it (the fund) special treatment.
The relationship has been further damaged by the fund’s decision to sell down its shareholding into an already falling market for Telstra shares.
The fund revealed last month that it had sold 113.6 million shares for about $300 million, which helped push the share price down to new record lows at the time.
Noted commentator, Stephen Bartholomeusz said this in a column on Friday afternoon.
"Now, it appears, the fund has informally declared war on Telstra, even to the point of voting against relatively uncontroversial changes to its constitution and the appointment of a new director, Dr Nora Scheinkestel, who bears no responsibility for Telstra’s past," he wrote.
"The fund, of course, expresses it differently, saying that the Board of Guardians would continue to "engage constructively" with Telstra and exercise its ownership rights to "enhance shareholder value."
"On the evidence so far the fund’s "constructive engagement" hasn’t helped Telstra or the value of the fund. The latest intervention and the prospect of more collisions between the embattled company and its biggest shareholder are unlikely to be any more helpful or value-accretive."
Strong stuff and given that attitude, it’s no wonder the Telstra share price has been weakened in the past few months.
And The Future Fund has been devaluing its own holding, which is an asset of the Australian people, all without any input from us.
The comments on the dividend followed an admission from the company’s CEO, David Thodey, that first half earnings would be lower.
Revenue will be flat, while the customer base will increase, he said.
"I currently expect our half-year results will show higher customer numbers, a low double digit decline in EBITDA as a result of increased redundancy costs in the first half and a change in the recognition of revenue from the Sydney Yellow Pages from the first half to the second half," Mr Thodey said.
"The company remains strong and in an excellent position to capitalise on the emerging market opportunities," Mr Thodey said.
Negotiations on the national broadband network (NBN) remain ‘‘critically important’’, Mr Thodey said, with the company keen to see talks progress as quickly as possible.
Chairman Catherine Livingstone told the meeting the board remained committed to maintain its 28 cent fully-franked dividend for this and the next financial years.
Telstra shares ended up 2.3%, or 6c at $2.62.
The news on the dividend helped, the actions of the Future Fund didn’t.
