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Last Updated: Wednesday, 17 August 2005, 06:03 GMT 07:03 UK
Howard paves way for Telstra sale
People using Telstra phone boxes
There may be public and political opposition to the sale plan
Australia's government will spend 3.1bn Australian dollars (1.31bn; $2.4bn) on rural phone services after confirming plans to sell its stake in Telstra.

Prime Minister John Howard had said in November the government was planning to sell its 51.8% stake in the state communications giant, worth A$30bn.

Legislation to approve the sale will be introduced to parliament in two weeks.

An A$2bn rural telecoms fund will now be created, and A$1.1bn spent on a roll out of broadband around the country.

However, Mr Howard - serving his fourth term as Prime Minister - may face heavy challenges to the sale from opposition political parties, while a recent opinion poll showed there may also be strong public opposition.

There are fears that privatising Telstra will cause service in rural areas, where there is less competition, to suffer.

'Not in national interest'

However, if all lawmakers in the ruling coalition back the legislation it will become law because Mr Howard has majorities in both houses of Parliament.

"The decision that we've taken today will, I believe, reflect a fundamental reality and that is, that it is quite counter-productive and not in the national interest for the Australian government to own more than half of the largest company in Australia," Mr Howard said.

Mr Howard added that the government's six billion shares were expected to be sold next year, but an exact date has not been set of the sell off.

Since the government last sold shares in Telstra in 1999, the stock has fallen in value from A$7.40 to A$4.85 on Wednesday.

Earlier this year American Sol Trujillo took over as the company's chief executive, replacing Ziggy Switkowski.

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