As much as $150 million of the A$8 billion ($9.1 billion) Telstra share sale could end up in the hands of New Zealand shareholders, market sources said yesterday.
But New Zealand institutional investors at least are only lukewarm on the offer, saying regulation remained a threat to growth of thebusiness.
One fund manager: "We will take a look at it but it is not an attractive sector to be invested in at the moment. There are regulatory issues and there is a lot of investment needed."
Existing Telstra shareholders will be offered one share for every two shares of the Australian giant they own and will get minimum guaranteed entitlement of 3000 shares, and a maximum of 200,000 shares.
All New Zealand investors are guaranteed a minimum of 2000 shares and may submit applications of up to 200,000 shares.
Shares bought in the offer will be paid for in two instalments.
New Zealand investors will pay A$2.10 for the first instalment - A10c more than Australian retail investors will pay. The second-instalment amount will depend on demand from large investors and is due on May 29.
A receipt after the first payment will entitle holders to vote at shareholder meetings and get dividends.
Telstra expects to pay a dividend of A28c a share for the financial year ending next June 30. But it will not offer guidance on future dividends "owing to the remaining uncertainty attached to regulatory outcomes" and extra reorganisation and market risks.
New Zealand observers said although the dividend offered a slightly better yield than Telstra's arch-local rival, Telecom New Zealand, investors would still be wary.
Paul Glass of Brook Asset Management said "Investors should not be seduced by yield: the earnings uncertainty for this company is very high".
The strength of the New Zealand dollar against the Aussie, now at A88c, may offset some of the concerns over investing in the shares.
The retail offer opens on October 23 and closes on November 9.
