Telstra Fairfax buyout, fact or furphy?

Telstra has denied media reports that it was planning to take over newspaper publisher John Fairfax Holdings, while Prime Minister John Howard labelled public scrutiny on the boardroom activities as “absurd”.

In a statement to the media today, Telstra chairman Bob Mansfield denied reports published in The Bulletin magazine and aired on Channel 9 that he and Telstra chief Ziggy Switowski had proposed to the board to buy Fairfax.

However, Prime Minister Howard said the reports that the board of Telstra was divided on a proposal to buy Fairfax highlighted the need for the telecommunications giant to be fully privatised.

“I'm not going to comment on the internal deliberations of a large corporation, that's not my role,” Howard said in an interview on ABC radio.

“This whole incident highlights the absurdity of continued government ownership,” Howard said.

“This company can't issue shares to raise capital, it's very limited in what it can do because of that majority government ownership and those very limitations deny the millions of Australian shareholders in Telstra a full return on their investment.”

Mansfield said: "Whilst I do not normally comment on boardroom discussions, I am doing so in this case to correct these factual inaccuracies.”

“A claim made in The Bulletin magazine and on Channel 9 that the Telstra CEO and chairman proposed buying newspaper publisher John Fairfax for upwards of $3.5 billion is incorrect. That was not the case and no such discussion occurred."

Mansfield admitted that a preliminary scenario was put to the board recently, but said “it was wrong to characterise this as a proposal for which board approval was sought to proceed with any merger or acquisition activity.”

The scenario put to the board, according to Mansfield, involved the formation of a new company which would have combined the activities of Telstra's advertising business -- Sensis, which publishes Yellow Pages -- with those of newspaper publisher John Fairfax.

“Telstra expected to have had majority ownership in the merged entity," he said. The Telstra Board rejected this proposal.

Meanwhile, opposition communications spokesman Lindsay Tanner called for the resignation of Switkowski and Mansfield over the Fairfax issue.

Labelling the idea of the telco giant owning the media giant a “disaster for Australian democracy”, Tanner said it would mean that “most of the serious sources of media commentary and scrutiny of Telstra's performance would be owned by or in partnership with Telstra… And it would mean the government owning one of the major commercial media organisations scrutinising its performance.”

“Telstra is a majority government-owned company,” Tanner said. “Bob Mansfield and John Howard might call this 'absurd' but it is the will of the Australian people and of the Australian parliament.”

“John Howard is letting Telstra behave as though it has already been privatised,” Tanner said.