Telstra denies wanting Fairfax

Telstra, Australia's biggest telco, yesterday denied reports its two top executives had proposed buying newspaper publisher John Fairfax Holdings, but said it remained interested in media content deals.

An offer for Fairfax, Australia's second-biggest newspaper publisher, was "never discussed", the phone company's chairman, Bob Mansfield, told ABC radio.

The board did discuss Telstra's Sensis internet directory business and the possibility of a transaction with Fairfax, Mansfield said.

The Bulletin magazine on Tuesday said Mansfield and chief executive Ziggy Switkowski's plan to offer at least A$3.5 billion for Fairfax was rebuffed by other board members over concern that Fairfax did not provide the sort of content that would benefit Telstra.

Buying Fairfax would give Melbourne-based Telstra access to news and advertising from newspapers including the Sydney Morning Herald, the Australian Financial Review and the Age to distribute through its BigPond internet site and to mobile phone customers.

Fairfax also owns the Dominion Post and Sunday Star-Times in New Zealand.

A spokeswoman for Communications Minister Daryl Williams said Telstra had told the Government the board would consider bidding for Fairfax.

"The Government was advised that Telstra's board would be considering purchasing Fairfax," spokeswoman Carina Tan-Van Baren, said in an interview. "Telstra has advised the Government that the board has decided not to pursue the matter."

Prime Minister John Howard said the incident highlighted the fact that the Government's stake in Telstra unnecessarily restricted the board's freedom.

"It's no longer appropriate, in the interests of the hundreds of thousands of shareholders, ordinary shareholders, that the Government own 50 per cent of that company because it prevents it acting as an ordinary corporation in the marketplace," Howard told ABC radio.

Later in the day Mansfield clarified his denial.

"The scenario put to the board involved the formation of a new company which would have combined the activities of Telstra's advertising business Sensis, and other advertising related assets, with those of newspaper publisher John Fairfax.

"Telstra expected to have had majority ownership in the merged entity."

Acquiring Fairfax wouldn't help Telstra, said Brian Ingham, who holds Telstra stock for the equivalent of A$60 million ($67.7 million) he helps manage at IMB Matrix Asset Management.

"A Fairfax bid is ludicrous," Ingham said. "Ziggy hasn't got a glowing pedigree when it comes to acquisitions. I'm glad the board knocked it on the head."

Switkowski is seeking to cut costs by A$800 million to help the phone company return to 4 per cent annual growth within three years. The former government monopoly last week said first-half sales fell. Profit doubled to A$2.3 billion from A$1.18 billion a year ago, when Telstra wrote off its investment in Reach, an undersea cable Venture with PCCW.

"Ziggy is desperately seeking growth and Fairfax wouldn't do it for him," Ingham said. "I'm not a big buyer of what Ziggy has done at Telstra. If anything, there should have been heads rolling after the CSL and Reach fiascos, rather than quashed takeover ambitions for local media entities."

The Government is seeking parliamentary approval to sell its remaining stake in Telstra. Opposition senators will probably reject the plan over concerns about rural services.

- AGENCIES